OWN CORRESPONDENT, London | Wednesday 2.00pm.
GOLD prices were seen extending losses after overnight falls sparked by the US interest rate rise of 50 basis points.
”The dollar strengthened on the back of higher interest rates, so producing-countries currencies weakened and are putting pressure on gold,” said one European trader said.
In the short term, dealers expect a weaker spot market amid worries that Australian producers will step up forward sales to take advantage of the fragile Australian dollar.
Traders said the Australian dollar’s dive below 57 US cents on Tuesday for the first time since September 1, 1998, heightened caution about forward gold sales by the nation’s producers.
Gold broke through its $275 psychological support fix at $274,85 an ounce, and traders said sentiment in the market is bearish. At just after lunch it was trading at $274.
Despite good physical demand, a combination of the strong US dollar, higher US interest rates, Swiss and UK gold sales, and a drought in India which is hampering imports, are sketching a negative outlook for the yellow metal.
”This short-term sentiment remains negative and the main focus will now be the Bank of England auction to be held next Tuesday,” said Frederic Panizzutti, head of strategy research at MKS Finance in Geneva. — Reuters