Gold prices fell more than 1% to a near one-week low on Wednesday as hawkish signals from Federal Reserve policymakers bolstered rate hike expectations and powered the US dollar to two-month highs, weighing on non-yielding bullion.
Spot gold was down 1.7% at$4,282.53 per ounce, as of 1725 GMT, after having hit its lowest level since September 17 earlier. US gold futures for December settled 1.3% lower at $4,318.40.
Gold is pressured by the higher dollar, said Peter Grant, vice president and senior metals strategist at Zaner Metals. “Post-FOMC Fed speak has been fairly hawkish. So the market is building in expectations of at least one more rate hike before the end of the year. And that’s putting gold under pressure.”
The dollar was at a two-month high, making greenback-priced bullion more expensive for holders of other currencies.
Fed policymakers struck a hawkish tone this week, with Fed Bank of Chicago President Austan Goolsbee saying the US central bank may need to treat the current energy shock as a source of persistent inflation rather than expect it to dissipate on its own.
Richmond Fed President Tom Barkin and Boston Fed President Susan Collins both voiced support for last week’s rate hike given concerns about inflation.
The comments follow those of other Fed officials who have broadened their concerns about inflation.
Although bullion is a traditional inflation hedge, rising
interest rates can reduce its appeal to interest-bearing assets.
Traders see a 77% chance of a rate hike in October, and a
95% chance of one in December, according to CME’s FedWatch Tool.
US President Donald Trump warned on Tuesday that he could
“annihilate” Iran. Brent futures rose above the $100 a
barrel mark but held near a two-week low.
Bullion has adopted an almost inverse relationship to oil
prices since the US-Israeli war on Iran broke out in late
February, weighed down by fears of inflation and tighter
monetary policy from central banks as energy prices rose.
Among other metals, spot silver fell 3.9% to $64.45
per ounce, platinum lost 5% to $1,741.83, and palladium
declined 3.7% to $1,259.24.
Source: Khaleej Times