Firmer dollar bumps gold to two-week low

Gold prices slipped to a two-week low on Thursday, as a stronger US dollar and expectations of big interest rate hikes from the Federal Reserve diminished the metal’s appeal.

Spot gold was down 0.3% at $1,691.63/oz, as of 3.12am GMT, after touching its lowest level since September 1 at $1,689.78 earlier in the session. US gold futures fell 0.4% to $1,702.40.

“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 edged higher towards recent peaks, 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 US 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 US interest rates as they increase the opportunity cost of holding the non-yielding bullion while boosting the dollar.

Meanwhile, IMF chief Kristalina Georgieva said on Wednesday central bankers must be persistent in fighting broad-based inflation.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.24% to 960.56 tonnes on Wednesday from 962.88 tonnes on Tuesday.

“Outflows from gold-backed exchange traded funds suggest investors are reluctant to hold the precious metal in the short term,” analysts at ANZ said in a note.

Among other precious metals, spot silver shed 1.1% to $19.48/oz, platinum fell 0.5% to $900.99 and palladium slipped 0.4% to $2,154.42.