Gold fell for the ninth day in a row, its longest losing streak in a year, and the dollar strengthened versus all of its major peers after Federal Reserve Chair Janet Yellen said an interest-rate increase is likely in coming months. Japanese shares rose, while China’s retreated.
Bullion declined with silver and platinum as the prospect of higher borrowing costs in the U.S. 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. Financial markets in the U.S. and U.K. are shut for holidays.
Yellen said Friday 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. Fed Funds futures show a better-than-even chance that borrowing costs will be raised by July and data at the end of last week showed U.S. 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.”
Japan released retail sales figures on Monday showing that growth stalled, underscoring weakness in private consumption and increasing the likelihood that a planned sales-tax hike will be postponed. France, Greece and Sweden are due to report gross domestic product data, while economic sentiment indicators for the euro area are also scheduled.
Gold for immediate delivery dropped as much as 1 percent to $1,200 an ounce, a level last seen in February. Money managers’ cut bullish bets on the metal by the most this year during the week ended May 24, according to U.S. Commodity Futures Trading Commission data. Silver slid 1.6 percent as of 11:44 a.m. Tokyo time, while platinum retreated 0.5 percent.
Copper futures slipped 0.6 percent in New York, snapping a four-day advance. The London Metal Exchange is closed on Monday.
West Texas Intermediate crude was little changed at $49.36 a barrel, as data showed a slackening off in American drilling ahead of this week’s meeting of the Organization of Petroleum Exporting Countries. Issues including a production freeze will be discussed when OPEC gathers on June 2, said Iraq’s Deputy Oil Minister Fayyad Al-Nima, who will head his ministry’s delegation to the meeting.
The Bloomberg Dollar Spot Index advanced 0.2 percent, headed for its best close since March 15. South Korea’s won led losses among major currencies, sliding 0.9 percent.
The yen fell as much as 0.6 percent to 111 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 percent 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 percent. With the U.S. 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.
Japan’s Topix index climbed 0.7 percent, led by exporters as the yen weakened. The country needs to delay increasing its sales tax until late 2019 to sustain its economic recovery, Hakubun Shimomura, an aide to Prime Minister Abe, said Sunday on Fuji television. The increase was planned for April 2017.
The Shanghai Composite Index fell 0.3 percent and Hong Kong’s Hang Seng Index added 0.3 percent. Futures on the S&P 500 gained 0.2 percent, after the benchmark rallied 0.4 percent on Friday.
Yields on 10-year Australian bonds rose for the first time in three sessions, adding two basis points, or 0.02 percentage point, to 2.28 percent following a similar-sized move in U.S. Treasuries on Friday.
The cost of insuring corporate bonds against nonpayment in Japan fell to an eight-month low. The Markit iTraxx Japan index dropped two basis points to 63 basis points, according to prices compiled by Citigroup Inc. The Markit iTraxx Asia index fell one basis point to 139.5 basis points, prices from Australia & New Zealand Banking Group Ltd. show. That’s set for the lowest close in a month, according to data provider CMA.