Gold price down to 7 weeks low

Report: In the long term, gold may drop to $900/ounce

Baku. 26 May. REPORT.AZ/ Gold fell to fresh 7-week lows on Wednesday, extending sharp losses from the previous session, as investors continued to stake their bets on a summer interest rate hike by the Federal Reserve.

On the Comex division of the New York Mercantile Exchange, gold for June delivery traded between $1,217.50 and $1,230.20 an ounce before settling at $1,224.00, down 5.20 or 0.42% on the session. Gold suffered its sixth straight loss and seventh losing session over the last 10 trading days. Since hitting 15-month highs around $1,300 an ounce at the start of May, gold has plunged more than $70 an ounce or 5%. In spite of its recent struggles, the yellow metal is up by more than 13% since the start of the year and is on pace for one of its strongest first halves of a year in more than a decade.

Gold likely gained support at $1,209.20, the low from April 1 and was met with resistance at $1,304.40, the high from May 2.

Investors took a breather on Wednesday, ahead of the release of key U.S. economic data and a closely-watched appearance by Fed chair Janet Yellen at week's end. When the U.S. Census Bureau reports its second estimate for first quarter GDP on Friday morning, analysts expect to see a 0.4% increase from initial forecasts, amid possible upward revisions in consumption expenditures and business fixed investment. Analysts also anticipate that the GDP Price Index will remain steady at 0.7%. In addition, the University of Michigan is expected to report a slight decline in consumer sentiment to 95.5, after the flash reading surged by almost 7 points to 95.8, its strongest level in more than a year.

Market participants also await comments from Yellen on Friday afternoon at Harvard University for further indications on the timing of the Federal Open Market Committee's (FOMC) first interest rate hike in 2016. The dollar has gained strength, while gold has fallen precipitously since the minutes from the Fed's April meeting last week showed that the U.S. central bank could support a rate hike next month if the incoming data continues to show broad improvements in the economy. In two rare public appearances this spring, Yellen has largely maintained a dovish stance that the Fed will raise rates gradually in the current cycle, amid widespread volatility in global financial markets and persistently low inflation.

The CME Group's Fed Watch tool indicated on Wednesday that there is a 31.9% chance the FOMC will raise rates in June, near the high end of estimates from earlier this week. Some analysts appear concerned that the FOMC could delay a potential rate hike until after a controversial referendum on the U.K.'s status in the European Union on June 23. When the FOMC meets again in July, there is now a 45.7% that the committee will raise rates, up from 15.0% last month. Any rate hikes by the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.20% to an intraday low of 95.36. The index is down by more than 4% since early-December. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for July delivery gained 0.046 or 0.28% to $16.300 an ounce.

Copper for July delivery surged 0.034 or 1.67% to $2.101 a pound.

Analytical group of Report forecasts that, gold per ounce, after rising to the level of $1 250 gold will drop to $ 1 150. In the long term, gold may drop to $900/ounce.

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