Gold prices fell in Asia as the dollar showed gains, making the commodity priced in greenbacks more expensive for key buyers in countries such as China and India. Demand from India ahead of the festival season is eyed for physical support. Overnight, gold prices fell sharply on Wednesday amid a rally in the dollar on the back of rising expectations of a year-end rate hike and tax reform. Expectations grew that tax reform will be implemented sooner rather than later supporting a move higher in dollar, pressuring gold prices as Republicans in the U.S. Congress and the White House unveiled plans to change America’s tax code in a proposal that slashes taxes on businesses the wealthy. Dollar-denominated assets such as gold are sensitive to moves in the dollar – A rise in the dollar makes gold expensive for holders of foreign currency and thus, reduces demand. That added further pressure on the yellow metal amid an uptick in expectations for a Federal Reserve rate hike later this year following economic data showing the economy continued to strengthen.
According to market source, nearly 80% of traders expect a December rate hike, compared to about 60% a week ago.
Source: Investing
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