Gold hits near 1-year low on dollar strength, imminent rate hikes

GOLD prices fell on Thursday (Jul 21) to their lowest in nearly a year, as an elevated US dollar and prospects of more interest rate hikes by major central banks to combat soaring inflation weighed on bullion's appeal.

Spot gold was down 0.2 per cent at US$1,693.90 per ounce by 12.52 am GMT, after falling to its lowest since early August 2021 at US$1,691.40 in early Asian trade.

US gold futures fell 0.5 per cent to US$1,692.10 per ounce.

The dollar held below 2-decade highs against its rivals, making greenback-priced bullion more expensive for buyers holding other currencies.

The European Central Bank will raise interest rates for the first time in 11 years on Thursday with a bigger-than-flagged move seen as increasingly likely as policymakers fear losing control of runaway consumer price growth.

The US Federal Reserve is widely expected to raise interest rates by 75 basis points at its policy meeting next week.

British inflation in June surged to a 40-year peak, bolstering chances of a half-percentage-point Bank of England rate hike next month.

Although gold is seen as a hedge against inflation, rising interest rates increase the opportunity cost of holding bullion, which pays no interest.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.3 per cent to 1,005.87 tonnes on Wednesday from 1,009.06 tonnes on Tuesday.

SEE ALSO

Gold steady as dollar dip counters higher bond yields

European Union diplomats meeting in Brussels on Wednesday agreed a new round of sanctions against Moscow for invading Ukraine, including a ban on importing gold from Russia.

Spot silver was flat at US$18.66 per ounce, platinum eased 0.2 per cent to US$856.12, and palladium rose 0.2 per cent to US$1,864.83. REUTERS