On Friday, gold continued its slide after data out of the US showed the world’s largest economy is growing faster than previously estimated and Federal Reserve chair Janet Yellen suggested an early interest rate hike may be appropriate.
In late afternoon trading gold futures in New York for delivery in June dropped to a day low of $1,206.40 an ounce, levels last seen February 22 on an intra-day basis. Earlier futures contracts settled at $1,213, the lowest closing price since the beginning of April.
The gold price is down more than $90 per ounce in the month of May after briefly scaling $1,300 at the end of April. Gold is in the midst of its longest unbroken losing streak since late November after falling for eight days straight. Year to date gold is holding onto double digit gains.
Sentiment on gold markets have shifted dramatically in recent weeks and Yellen was uncharacteristically hawkish during a debate at Harvard University on Friday ahead of a long weekend in the US.
Yellen echoed similarly aggressive comments by her colleagues on the Fed’s rate-setting committee, saying a rate rise during the summer months is probably appropriate.
Yellen’s comments caused a spike in government bond yields and boosted the dollar which usually move in the opposite direction of the gold price. Higher interest rates raises the opportunity costs of holding gold as the metal provides no yield and any gains for investors must come through price appreciation.