Gold falls as Fed’s rate hike signal boosts dollar

Gold prices retreated on Thursday as the US dollar and bond yields powered higher after the Federal Reserve signalled another rate hike this year and lesser chances of monetary policy easing through 2024.

Spot gold eased 0.1% to $1,927.63 per ounce by 3.27am GMT, while US gold futures shed 1% to $1,947.80.

Prices on Wednesday hit their highest since September 1 before the US Fed revised its economic projections with higher-for-longer rate warnings.

“Commentary signalled rates will likely stay higher for longer, which saw the market price-in reduced rate cut expectations from the Fed funds rate through 2024, which we see driving downward pressure to gold prices in the near term,” NAB Commodities Research said in a note.

The US dollar index climbed 0.4% to its highest since March 9, while two-year treasury yields rose to 17-year high after the Fed held interest rates steady, but stiffened a hawkish monetary policy stance.

The Fed sketched a stricter policy path moving forward in an inflation fight they now see lasting into 2026, but believe they can succeed in lowering inflation without wrecking the economy or leading to large job losses.

Higher interest rates discourage the buying of non-interest-paying bullion, which is priced in dollars.

“Any further downside is likely to leave the $1,900 level on watch as immediate support to hold,” said Yeap Jun Rong, Market Analyst at IG.

On investors’ radar later in the day will be the Bank of England’s (BOE) policy decision on whether it is halting a run of rate hikes that stretches back to December 2021.

In other metals, spot silver fell 0.5% to $23.12 per ounce, platinum slipped 0.9% to $920.45 and palladium dropped 1.1% to $1,260.37.

Reuters