Gold hits 8-week low on robust dollar, steep rate-hike bets
Gold prices fell to their lowest level
in eight weeks on Thursday, weighed down by a stronger dollar
and bets that the U.S. Federal Reserve will deliver an
aggressive rate hike to tame stubbornly high inflation.
Spot gold was down 0.4% at $1,688.49 per ounce, as of
0740 GMT, after touching its lowest since July 21 earlier in the
session. U.S. gold futures fell 0.6% to $1,698.10.
“The Fed needs to shock the economic system hard and the
chance of a 100-basis-point rate rise is a very real
possibility,” said Michael Langford, director at corporate
advisory firm AirGuide.
The dollar index rose 0.2% and was not far from its
two-decade peak scaled last week, as hotter-than-expected
inflation data boosted bets for even more aggressive monetary
policy tightening by the Fed.
Fed funds futures are pricing in a 37% chance that the U.S.
central bank will hike rates by 100 basis points at its policy
meeting next week.
“A 100-basis-point rate rise will see gold break below
$1,680/oz,” Langford said.
Gold is highly sensitive to rising U.S. interest rates as
they increase the opportunity cost of holding the non-yielding
bullion while boosting the dollar.
Meanwhile, International Monetary Fund chief Kristalina
Georgieva said on Wednesday central bankers must be persistent
in fighting broad-based inflation.
“The outlook for gold is bearish … If you look at the
biggest gold fund (SPDR Gold Trust), we have seen liquidation in
ETFs,” said Jigar Trivedi, senior analyst currency and commodity
analyst at Mumbai-based Reliance Securities.
“After $1,680, $1,620 is the next support in gold.”
Among other precious metals, spot silver dropped 1.3%
to $19.44 per ounce, platinum fell 0.1% to $905.16 and
palladium was down 0.8% at $2,141.30.
(Reporting by Eileen Soreng and Arundhati Sarkar in Bengaluru;
Editing by Subhranshu Sahu and Sherry Jacob-Phillips)
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