July 22 (Bloomberg) -- Gold fell in New York as expectations for higher U.S. interest rates and a stronger dollar countered haven demand amid tension in Ukraine and Gaza.
The dollar reached a one-month high against a basket of 10 major currencies before data may show today that U.S. inflation held at the fastest pace since October 2012, supporting the case for the Federal Reserve to tighten monetary policy. Gold slid 28 percent last year on expectations the central bank will scale back stimulus as the economy improves.
Unrest in the Middle East and Ukraine helped prices rebound 9 percent this year. European Union governments labored to identify more Russian businesspeople and companies to sanction and pressed President Vladimir Putin to speed a probe into the downing of Malaysian Air flight MH17 or face isolation. U.S. Secretary of State John Kerry held talks with Egyptian officials on crafting a truce to end Gaza Strip fighting.
“While gold may get some support from unrest around the world, the longer term downtrend is intact because of the expectations for higher U.S. interest rates,” said Lv Jie, an analyst at Cinda Futures Co., a unit of one of four funds in China created to buy bad debt from banks. “Improving U.S. economic data is positive for the dollar which in turn weighs on gold.”
Gold for December delivery fell 0.5 percent to $1,309.50 an ounce by 7:39 a.m. on the Comex in New York. It has retreated from $1,346.80 on July 10, the highest since March 19. Bullion for immediate delivery lost 0.4 percent to $1,307.61 in London, according to Bloomberg generic pricing.
Futures trading volume was 15 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg show.
Traders saw a 46 percent chance the Fed will raise the target rate for overnight bank lending by June, according to futures data compiled by Bloomberg as of yesterday. That’s up from a 40 percent possibility on June 30.
“Geopolitical risks could escalate further and add to the upside, but these usually only have a temporary effect on the market,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a note today. “We do not expect a sustained price rebound here with hardly any support from the physical side at the moment.”
Silver for September delivery fell 0.6 percent to $20.895 an ounce in New York. Platinum for October delivery lost 0.3 percent to $1,488.50 an ounce. Palladium for September delivery declined 0.5 percent to $872.65 an ounce. It reached a 13-year high of $890 on July 17.
The metal advanced 21 percent this year as usage in cars rose and a mine strike cut output in South Africa. The country is the largest producer of platinum and second-biggest for palladium, after Russia. Holdings of both metals in exchange- traded products reached a record yesterday, data compiled by Bloomberg show.
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