Gold prices drop over 2% as firmer dollar, US rate outlook weigh
Investors expect the US Federal Reserve to keep interest rates steady at the end of its two-day meeting on Mar 18
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[BENGALURU] Gold fell more than 2 per cent on Monday (Mar 9), as a stronger US dollar weighed on greenback-priced bullion, while higher energy costs fuelled inflation concerns and further dimmed the prospects for near-term reductions in interest rates.
Spot gold was down 2.5 per cent at US$5,041.89 per ounce, as at 8.48 am. US gold futures for April delivery were down 2.1 per cent at US$5,049.40.
The US dollar hovered near a three-month high hit last week, making bullion more expensive for holders of other currencies.
The US 10-year Treasury yields climbed to a near one-month high, raising the opportunity cost of holding non-yielding gold.
Oil-driven inflation fears and delayed rate-cut expectations likely strengthened US yields and the dollar, outweighing safe-haven demand and pushing gold down.
Raising geopolitical tensions in the Middle East, Iran on Monday named Mojtaba Khamenei to succeed his father Ali Khamenei as supreme leader, signalling that hardliners remain firmly in charge.
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Crude oil prices rose sharply to over US$100 per barrel amid fears of tighter supply and prolonged disruptions to oil shipments through the Strait of Hormuz.
Investors expect the US Federal Reserve to keep interest rates steady at the end of its two-day meeting on Mar 18, as per CME Group’s FedWatch tool. The odds of a June hold, which were below 43 per cent last week, climbed to more than 51 per cent.
Share futures slid in Asia on Monday as the inflationary pulse from surging oil prices threatened to raise living costs, and perhaps interest rates, across the globe.
Meanwhile, data on Friday showed that US nonfarm payrolls decreased by 92,000 jobs last month, compared with economists’ expectations for a 59,000 climb, while the unemployment rate rose to 4.4 per cent.
Spot silver dropped 4 per cent to US$80.99 per ounce. Spot platinum fell 3.8 per cent to US$2,054.65, and palladium was down 2.1 per cent at US$1,590.32. REUTERS
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