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Gold prices lurched lower on Wednesday on the back of stronger than expected US economic data.
The precious metal extended its declines falling as much as 1.3 per cent to $1,198.24 a troy ounce after a gauge of US manufacturing climbed to its highest level in more than 2 years in January. The sell-off in the precious metal had however begun earlier in the day after a report showed that the US private sector created 246,000 jobs last month, the most since June.
The healthy data arrived ahead of the Federal Reserve’s monetary policy statement on Wednesday. While officials are expected to leave rates unchanged today, they have signalled three rate rises this year and strength in the US economy boosts the case for a rate rise.
Compounding gold’s woes was the US dollar, which, climbed 0.4 per cent against a basket of peers. Strength in the greenback tends to drag on the precious metal that is dollar-denominate by making it more expensive for foreign buyers.
Wednesday’s slide trimmed gold’s year-to-date gains to about 4.9 per cent as political uncertainty and a weaker dollar helped the precious metal to its biggest monthly advance since June last month.