Gold eases as Federal Reserve hints at more rate hikes next year

GOLD prices inched down in early Asian hours on Thursday, after the US Federal Reserve signalled to more interest rates hikes next year. Spot gold slipped 0.1 per cent to US$1,806.11 per ounce, as of 0035 GMT. US gold futures were little changed at US$1,817.80. The Fed will deliver more interest rate hikes next year, even as the US economy slips towards a possible recession, Fed Chair Jerome Powell said on Wednesday, arguing that a higher cost would be paid if the central bank does not get a firmer grip on inflation.

Gold is traditionally known as an inflation hedge but higher interest rates tend to dim the bullion’s appeal as it increases the opportunity cost of holding the non-yielding metal.

The European Central Bank is set to raise interest rates for a fourth straight time, albeit probably by a smaller increment, and lay out plans to drain cash from the financial system as it fights runaway inflation.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.1 per cent to 911.56 tonnes on Wednesday. China has set out plans to expand domestic consumption and investment, the official Xinhua news agency said on Wednesday, as the world’s second-largest economy struggles with Covid-19 and weakening external demand. Spot silver fell 0.4 per cent to US$23.81, platinum lost 0.1 per cent to US$1,027.82 and palladium was down 0.1 per cent to US$1,914.98. REUTERS