HONG KONG/WELLINGTON (BLOOMBERG) - Gold fell for the ninth day in a row, its longest losing streak in a year as the US dollar strengthened after Federal Reserve Chair Janet Yellen said on Friday an interest-rate increase is likely in coming months.
Bullion declined with silver and platinum as the prospect of higher borrowing costs in the US damped the appeal of non- interest-bearing assets.
The Bloomberg Dollar Spot Index climbed to its highest since March, while China's yuan dropped by the most in two weeks as the central bank weakened the currency's daily reference rate. The yen sank to a one-month low versus the greenback and Japanese shares were set for their highest close in May after an aide to Prime Minister Shinzo Abe said a sales-tax increase will probably be delayed.
Bloomberg's gauge of the greenback's strength is poised for its biggest monthly jump since September 2014, having surged as Fed funds futures showed the odds of a US interest-rate hike by July more than doubled to 54 per cent. Ms Yellen said that an improving American economy would probably warrant another rate increase "in the coming months," a view expressed by several regional Fed chiefs in recent weeks, and Friday data showed growth picked up more than was previously estimated in the first quarter.
"The central issue for a lot of markets, including commodities, is now the timing of that next rate hike," Ric Spooner, chief market strategist for CMC Markets Asia Pacific Pty, said by phone from Sydney. "If we do see a June or July increase then that just increases the possibility of a second one this year."
The Bloomberg Dollar Spot Index advanced 0.2 per cent, headed for its best close since mid-March. South Korea's won led losses among major currencies, sliding 1 per cent.
The yen fell as much as 0.8 per cent to 111.16 per dollar. The currency's only back-to-back quarterly gains since Prime Minister Abe came to power occurred when Japan's sales tax was raised in March 2014.
The yuan slid 0.24 per cent to 6.5807 per dollar, poised for its lowest close since January, after the People's Bank of China weakened its daily fixing by 0.45 per cent. With the US poised to raise interest rates and pressure building on China to ease monetary policy, cash outflows will accelerate, said Song Yu, China economist for Goldman Sachs/Gao Hua Securities Co. in Beijing.