Gold Ends Below $1100 On Strong Dollar, Rate Hike Worries

(RTTNews) - Gold futures dropped for a tenth straight session to end at a 5-1/2-year low on Wednesday, as the dollar strengthened against some major currencies and with investors convinced the Federal Reserve will finally raise interest rates by the year end, diminishing gold's appeal as a hedge against inflation.

The precious metal's safe haven appeal seem to have lost its sheen as the economy continues to improve, with investors preferring the riskier equity assets, even as a strong dollar impacts most commodities.

The dollar got a boost after a report from the National Association of Realtors on Wednesday showed U.S. existing home sales in June to have reached its highest level in over eight years, after reporting a sharp increase in sales in the previous month.

Gold for August delivery, the most actively traded contract, dropped $12.00 or 1.1 percent, to settle at $1,091.50 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for August delivery scaled an intraday high of $1,102.30 and a low of $1,085.60 an ounce.

On Tuesday, gold prices fell $3.30 or 0.3 percent, to settle at $1,103.50 an ounce, after having plunged over two percent the day before, with investors continuing to stay away from the precious metal amid speculation the U.S. Federal Reserve will react to an improving economy and raise interest rates this fall.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged down to 689.69 tons on Wednesday from its previous close of 694.46 tons on Tuesday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 97.56 on Wednesday, down from its previous close of 97.32 in late North American trade on Tuesday. The dollar scaled a high of 97.79 intraday and a low of 97.11.

The euro trended lower against the dollar at $1.0937 on Wednesday, as compared to its previous close of $1.0967 in North American trade late Tuesday. The euro scaled a high of $1.0967 intraday and a low of $1.0871.

In economic news, the National Association of Realtors on Wednesday said U.S. existing home sales climbed 3.2 percent to an annual rate of 5.49 million in June from a downwardly revised 5.32 million in May. Economists expected existing home sales to edge up to an annual rate of 5.40 million in June from the 5.35 million originally reported for the previous month.

Elsewhere, a leading economic index for the Chinese economy was up 1.0 percent in June, the Conference Board said on Wednesday. That follows the 1.1 percent increase in May and the 1.5 percent spike in April.

From Europe, UK households' finance outlook for July dropped to its lowest level in a year, a survey by Markit Economics and financial information provider Ipsos Mori revealed Wednesday. The household finance index rose to 45.3 in July from 43.8 in the previous month. A score below 50 suggests pessimism regarding finances among the U.K. households. However, the latest score was slightly above the average recorded in the second quarter this year.

The Bank of England unanimously decided to keep its monetary policy unchanged at the meeting held early this month, but more rate-setters moved closer to vote for a rate hike. The Monetary Policy Committee voted 9-0 to retain its key rate at a record low 0.50 percent and asset purchase program at GBP 375 billion.

French manufacturing confidence improved more-than-expected in July, after falling in the previous month, figures from the statistical office Insee showed Wednesday. The manufacturing confidence index rose to 102.0 in July from 100.0 in June. Economists expected the index to rise to 101.0. In May, the reading was 103.0.