Gold jewellery
Gold jewelleryReuters

High volatility witnessed in gold prices in the past few weeks is expected to continue until the announcement of the first rate hike by the US central bank but ease thereafter.

"We assume that the gold price will remain under pressure until the first interest rate rise," said Commerzbank Corporates & Markets in a note.

Investors are concerned about the timing of the interest rate hike by the US Federal Reserve and once there is clarity over the timing, prices of the precious metal are expected to stabilize.

"The price should climb again just as soon as the uncertainty over the timing diminishes," said the note.

Currently, gold prices are trading at their five-year lows, as improving economic data in the US strengthened expectations of a US Fed rate hike in September.

On Tuesday, Atlanta Fed President Dennis Lockhart said in an interview with the Wall Street Journal that the "US economy was ready for an interest rate hike."

"Yesterday's interview is a strong indication that a rate hike will be forthcoming in September. The market responded by pricing in a rate hike in September with a likelihood of 50% for the first time this year," said Commerzbank.

At its July meeting, the US Federal Reserve had indicated that it was moving closer to raising rates for the first time after keeping them at record low since the financial crisis of 2008.

In the domestic bullion market, gold prices fell by Rs 110 to Rs 25,020 per 10 gm on Wednesday, as a strong dollar weighed heavily on the prices.

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