Gold dips amid firm dollar, concerns over aggressive US rate hikes

GOLD prices edged lower on Wednesday (Sep 14) after hotter-than-expected US inflation data boosted the dollar and fuelled expectations that the Federal Reserve will continue on aggressive policy tightening path.

Spot gold fell 0.2 per cent to US$1,698.14 per ounce, as of 1.20 am GMT. Prices fell 1.3 per cent on Tuesday, its biggest 1-day percentage decline since Jul 14.

US gold futures were down 0.4 per cent at US$1,710.

The dollar index, which measures the currency against 6 major peers, ticked 0.1 per cent higher after recording its biggest 1-day percentage gain since March 2020 overnight.

Benchmark US Treasury yields hovered close to a near 3-month peak touched on Tuesday.

US consumer prices unexpectedly rose in August and underlying inflation accelerated amid rising costs for rents and healthcare, giving the Fed ammunition to deliver a third 75 basis points interest rate hike next Wednesday.

The Fed is likely to raise US borrowing costs faster and further than previously expected after the inflation data, with Nomura’s economists saying they now believe a 100 basis-point rate hike is the most likely outcome at the September meet.

Even though gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding the bullion while boosts the dollar, in which the precious metal is priced.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.21 per cent to 962.88 tonnes on Tuesday from 964.91 tonnes on Monday.

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Gold edges higher on softer dollar ahead of US inflation data

Spot silver dipped 0.2 per cent to US$19.29 per ounce.

Platinum edged 0.3 per cent higher to US$880.67 and palladium fell 1 per cent to US$2,083.18. REUTERS