Gold slips as dollar claws back ground after US rates hike

Gold prices inched lower on Thursday, as the dollar recovered slightly after a large but widely expected interest rate hike by the US central bank sent the currency tumbling in the previous session.

Spot gold fell 0.1% to $1,831.29/oz as of 5.46am GMT, while US gold futures rose 0.7% to $1,832.60. The conflicting currents of support from potential safe-haven demand and inflationary hedge buying versus pressure from a higher interest rate regime are keeping gold prices balanced, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

Higher short-term US interest rates and bond yields increase the opportunity cost of holding bullion, which yields no interest.

The US Federal Reserve on Wednesday approved a 75 basis-point interest rate hike, its largest in more than a quarter of a century, to stem a surge in inflation, and flagged a slowing economy.

“Gold has been remarkably rangebound for weeks now [despite major news] … and it’s a real head-scratcher for traders at the moment to work out what exactly will drive gold out of this range,” McCarthy said, adding the dollar’s overall upward trend presented a cautious outlook for gold.

The Fed’s announcement drove longer-dated US government bond yields lower and nudged the dollar off two-decade peaks, which took gold as much as 1.9% higher in the previous session.

Meanwhile, Asian stocks rose on Thursday, carrying momentum from a global equities rally overnight. However, key investors with big positions in gold know that the economic outlook is still challenging and still prefer to hold bullion as a safe-haven asset, said Brian Lan, MD at dealer GoldSilver Central.

Spot silver was flat at $21.64/oz, platinum fell 0.1% to $938.59, and palladium dipped 0.2% to $1,857.72.