Gold’s relief rally fizzles as dollar firms on recession risks

GOLD prices retreated on Thursday (Sep 29) as the US dollar firmed on concerns that rising interest rates would spark a global recession, making greenback-priced bullion more expensive for overseas buyers.

Spot gold was down 0.2 per cent at US$1,656.59 per ounce, as of 1.42 am GMT. In the previous session, bullion rose as much as 2 per cent.

US gold futures dipped 0.2 per cent to US$1,667.10.

The dollar index was up 0.2 per cent, although the unit retreated from a 2-decade peak overnight as the sterling rallied following the Bank of England’s purchase of UK government bonds to restore financial stability in markets.

The lack of clear progress on inflation means the US central bank needs “moderately restrictive” interest rates that should reach a level between 4.25 per cent and 4.50 per cent by the end of this year, Atlanta Fed president Raphael Bostic said on Wednesday.

Gold prices have fallen 20 per cent since scaling above the key US$2,000 per ounce level in March, as rapid US monetary tightening made non-yielding gold less attractive and boosted the dollar to a multi-year peak.

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The US trade deficit in goods narrowed for a fifth straight month in August amid a decline in imports, which is being driven by slowing domestic demand as the Federal Reserve aggressively tightens monetary policy to tame inflation.

World Bank president David Malpass warned on Wednesday that it could take years for global energy production to diversify away from Russia, prolonging the risk of stagflation, or a period of low growth and high inflation.

Spot silver fell 0.4 per cent to US$18.82 per ounce, platinum was down 0.6 per cent at US$858.54 and palladium dropped 1 per cent to US$2,134.52. REUTERS