Dollar strength, looming rate hikes pin gold near 9-month low
Gold was pinned near a nine-month low on
Monday as bets for aggressive interest rate hikes by the U.S.
Federal Reserve and the dollar’s ascent dimmed appeal for
Spot gold fell 0.3% to $1,735.91 per ounce by 2:00
p.m. ET (1800 GMT). U.S. gold futures settled down 0.6%
Despite recession risks, lately investors have opted for
dollar over gold, pushing the currency to a near-two
decade peak, also eroding appeal for bullion among overseas
Interest rate hikes, meanwhile, raise the opportunity cost
of holding bullion since it pays no interest.
“Gold is under pressure as the dollar is making major runs
and there is expectations of a fairly large interest increase
after the (recent U.S.) federal report highlighted a strong
labor market,” Edward Moya, senior analyst with OANDA, said.
“Gold prices could tentatively breach below the $1,700 level
and then see strong support around $1,670.”
U.S. data on Friday showed labor market powered ahead with
strong job gains, giving the Fed ammunition to deliver another
75-basis-point rate hike this month.
Meanwhile, Fed’s Esther George, a dissenter at the central
bank’s 75 bps increase last month, said abrupt changes in rates
“could create strains” in economy.
But growing pessimism over the state of some economies in
Asia, and geopolitical instability to some extent, are limiting
gold’s losses, as bullion remains the go-to safe haven during
times of trouble, said Ricardo Evangelista, senior analyst at
Spot silver fell 0.7% to $19.16 per ounce.
Despite the fall in silver prices, the retail cost of
American Silver Eagle coins stayed high at around $35/ounce, a
premium of about 80% on the spot price, which appears to be high
enough to impact demand, Heraeus Precious Metals wrote in a
Platinum dropped 2.6% to $873.50 and palladium
was down 1.3% at $2,154.99.
(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in
Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)