Gold hits 8-week low on robust dollar, steep rate-hike bets

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Gold prices fell to their lowest level

in eight weeks on Thursday, weighed down by a stronger dollar

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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

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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

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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)