Gold dips as red-hot U.S inflation fans fears of massive rate hike

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Gold prices slipped on Thursday, with

bullion’s outlook hurt by fears the U.S. Federal Reserve could

opt for a more aggressive interest rate hike this month to

tackle sky-rocketing inflation.

Spot gold was down 0.5% at $1,726.29 per ounce by

0532 GMT. U.S. gold futures dropped 0.6% to $1,725.30.

The dollar steadied close to 20-year highs, hurting

demand for greenback-priced gold among buyers holding other


Benchmark U.S. 10-year Treasury yields rose, weighing on

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appetite for zero-yield gold.

Data released overnight showed U.S. annual consumer prices

jumped 9.1% in June, the sharpest spike in more than four


“The CPI release generated volatility but not direction,”

said Ilya Spivak, a currency strategist at DailyFX, reasoning

that markets now likely expected the Fed to front-load rates

more, and not necessarily tighten more overall, but said gold

still had a bearish outlook.

A rallying dollar sent gold prices to a near one-year low on

Wednesday following the inflation report, but a retreat in the

greenback helped bullion make a sharp recovery and end the

session higher.

Global markets swung wildly in the previous session. On

Thursday, Asian shares struggled on fears the Fed’s aggressive

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monetary policy could trigger a recession.

The Fed is seen ramping up its battle to curb inflationary

pressures with a supersized 100-basis-point rate hike at its

upcoming policy meeting on July 26-27.

Although gold is seen as an inflation hedge, higher rates

hurt the appeal of bullion, which bears no interest.

“It would be silly to say that 75 basis points is dovish,

but there is a risk here that the Fed does something that’s

objectively big, like 75, but gold rallies because it’s not

100,” Spivak said.

Spot silver dipped 0.8% to $19.03 per ounce, platinum

slipped 1% to $846.00, and palladium firmed 0.1%

to $1,976.08.

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by

Rashmi Aich and Sherry Jacob-Phillips)



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