Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold fell 1.5% to close at a three-week low under $1,255 as speculation deepens that the Federal Reserve will raise interest rates in June.

Wednesday's release of the minutes from the Fed's April meeting, which showed a majority of committee members inclined to hike in June, sent gold plunging in after-hours trade yesterday to around $1,258 an ounce. Today's action extended the drop by a relatively modest $3, with bargain-hunters stepping in to prevent deeper losses.

Data released today largely support the Fed's view that the economy is gathering speed. Initial jobless claims dropped by the most since February last week, and the Conference Board's index of leading indicators picked up in April.

In addition, another influential Fed official came out in support of tightening soon. William Dudley of the New York Fed said the economy is now "on track to satisfy a lot of the conditions" for a rate hike this summer. The CME FedWatch tool, which tracks Fed fund futures, places the odds of a June hike at 30%, up from nearly zero a month ago.

On the downside, manufacturing in the Philadelphia Fed region dropped deeper into negative territory last month. Following a similar decline in the Empire State survey a few days ago, the data show U.S. factories still struggling amid a strong dollar and soft global demand.

The dollar strengthened further against most rivals in response to the hawkish view on rates, pressuring gold and other commodities denominated in it for international trade by making them more expensive overseas.

The other precious metals finished sharply lower, with silver dropping 3.7% while platinum and palladium lost 2.8% and 3.7%, respectively. Like gold, they saw most of these losses yesterday in electronic trade after hours.

At the Comex close: June gold fell $19.60 to $1,254.80; July silver tumbled 64 cents to $16.49; July platinum slid $29.20 to $1,013.30; and June palladium surrendered $21.15 to $558.45 an ounce.