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Gold dips as renewed rate rise bets lift dollar; commods slide

Gold
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Gold fell 1 percent on Tuesday, pressured as the dollar strengthened on renewed expectations that the Federal Reserve will raise U.S. interest rates for the first time in nearly a decade.

Weakness in other commodities also weighed on gold, which rallied last week after the Fed left rates at ultra-low levels, keeping a lid on the opportunity cost of holding non-yielding bullion. Gold failed to maintain those gains after a Fed official emphasized that a rise had only been postponed.

Spot gold was down 0.7 percent at $1,124.96 an ounce, while U.S. gold futures for December delivery settled down 0.7 percent at $1,124.80 an ounce.

Platinum slid the most among precious metals, down more than 3 percent to a 6-1/2-year low. Some traders cited news that the falsification of Volkswagen AG U.S. vehicle emission tests could affect 11 million of its cars worldwide. Platinum is used in diesel catalysts.

Platinum was down 3.4 percent at $932.75 an ounce, after falling to its lowest since January 2009 at $929.50.

"It is a risk-off day with capital moving to bond markets as opposed to holding commodities or equities for the moment," said Bill Wosnack, a broker for Atlantic Floor Group in New York.

Commodity prices fell to two-week lows, stocks fell sharply and bond yields declined. Gold was not viewed as a safe-haven asset, but was pressured as the U.S. dollar rose to an almost two-week high.

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Dan Heckman, senior investment consultant for U.S. Bank Wealth Management in Kansas City, said gold was pressured by "a stronger dollar based on the belief that the Fed will raise rates still this year, possibly as soon as October, and a lot of criticism of the Fed not raising the Fed funds rate."

Atlanta Fed President Dennis Lockhart said on Monday that last week's decision was largely a "risk management" exercise, and he still expects an increase this year. St. Louis Fed President James Bullard said the central bank could lift rates at its October meeting.

"We're still in a situation where investors are going to wait and see when a hike will happen," Capital Economics analyst Simona Gambarini said.

Spot palladium was down 0.6 percent at $607.47 an ounce and silver down 2.6 percent at $14.77 an ounce.

The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, said its holdings fell for the fist time in nearly two weeks on Monday.