The Business Times

Gold hits 6-week trough on stronger dollar, rate hike worries

Published Thu, Sep 1, 2022 · 09:43 AM

GOLD prices slipped to a more than 1-month low on Thursday (Sep 1), as the dollar firmed and prospects of the US Federal Reserve continuing with its aggressive policy tightening stance weighed on the zero-yielding bullion’s appeal.

Spot gold fell 0.2 per cent to US$1,706.99 per ounce, as of 1.00 am GMT, after hitting its lowest level since Jul 21 at US$1,704.94 earlier.

US gold futures shed 0.5 per cent to US$1,717.50.

The dollar index was 0.1 per cent higher, while the benchmark US Treasury 10-year yields rising to their highest level since Jun 28.

The Fed will need to raise interest rates somewhat above 4 per cent by early next year and then hold them there in order to bring too high inflation back down to the central bank’s goal, Cleveland Federal Reserve Bank president Loretta Mester said on Wednesday.

Even though gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding bullion and boosts the dollar.

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Euro zone inflation jumped to another record high and will soon hit double-digit territory, heralding a string of big interest rate hikes even as a painful recession appears increasingly certain.

US private payrolls increased moderately in August, according to the ADP National Employment report.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.3 per cent to 973.37 tonnes on Wednesday.

Spot silver dropped 0.8 per cent to US$17.83 per ounce after falling to a more than 2-year low. Platinum fell 0.9 per cent to US$838.24 and palladium was 0.6 per cent lower at US$2,072.09. REUTERS

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