Gold declines to almost 2-month lows, as steep rate-hike bets support the dollar.
On Thursday, gold prices fell to over two-month lows as the dollar rose on growing expectations that the Federal Reserve will raise interest rates more aggressively.
Spot gold dropped to its lowest level since July 21 and then dropped 0.5% to $1,687.35 per ounce. To $1,697.20, U.S. gold futures saw a 0.7% decline.
According to Carsten Menke, Head Next Generation Research at Julius Bär, “the gold market has clearly priced in a more aggressive U.S. Federal Reserve ahead of next week’s meeting, confirming the central bank’s desire to battle inflation.”
While a 75-basis-point (bps) increase is generally expected, others are pushing for a 100-basis-point increase, which is partially reflected in the gold market, according to Menke. However, he added that a 75-basis-point increase might therefore be a pleasant surprise for the gold market.
While a 75-basis-point (bps) increase is generally expected, others are pushing for a 100-basis-point increase, which is partially reflected in the gold market, according to Menke. He added that a 75-basis-point increase might therefore be a pleasant surprise for the gold market.
For buyers from outside, a rising dollar makes gold priced in the greenback more expensive. Non-yielding gold has lost more than $380 from its March peak, when the Fed raised rates for the first time since 2018.
As it stands to lose out to other assets that pay interest, non-yielding gold is highly sensitive to rising US interest rates.
Kristalina Georgieva, the head of the International Monetary Fund, stated on Wednesday that central bankers must continue to fight broad-based inflation.
Furthermore, Jigar Trivedi, senior analyst for currency and commodities at Mumbai-based Reliance Securities, said that Gold’s outlook was negative. The firm had observed ETF liquidations, considering the largest gold fund (SPDR Gold Trust). He added that the next support in gold was $1,620 after $1,680.
