Gold sinks to one-week low after ‘very hawkish’ Fed minutes

Gold prices slid to one-week low on Thursday as minutes of the US Federal Reserve’s December meeting signalled quicker increases to interest rates, boosting the dollar and treasury yields.

Spot gold fell 0.3% to $1,804.60/oz by 10.38am GMT, having touched its lowest since December 29 at $1,792.30/oz. US gold futures dropped 1.5% to $1,797.70.

The “very hawkish” Fed minutes sent the dollar and the yields significantly higher, which has not helped gold, said independent analyst Ross Norman.

The dollar resumed its climb towards a recent 14-month high while benchmark US 10-year treasury yields rose to their strongest since April 2021.

The Fed minutes released on Wednesday showed that officials had discussed shrinking the US central bank’s overall asset holdings as well as raising interest rates sooner than expected to fight inflation, with an 80% chance of a quarter of a percentage point increase plausible in March.

Some investors view gold as a hedge against higher inflation, but the metal is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.

“Where the precious metal closes the week is likely to be heavily influenced by the key US jobs data on Friday,” FXTM analyst Lukman Otunuga said in a note.

“A strong report could cripple gold bugs, opening a path lower towards $1,786 and $1,770. Should $1,800 prove to be reliable support, prices may rebound back towards $1,810 and $1,831.”

In other metals, spot silver dropped 1.7% to $22.39/oz after dropping to $22.12, its lowest since December 16.

Platinum fell 0.9% to $974.13 and palladium rose 0.9% to $1,880.94/oz.