Gold at over 1-month low after Fed’s hint of early rate hikes

Gold at over 1-month low after Fed’s hint of early rate hikes

Gold prices hovered near a more than one-month low on Thursday as the dollar and U.S. Treasury yields jumped after Federal Reserve officials projected interest rate hikes sooner than expected.

Following a drop of 2.5% in the previous session to its lowest since May 6 at $1,803.79 per ounce, spot gold was slightly up 0.2% as of 0039 GMT in early Asian trade.

U.S. gold futures were down 2.4% at $1,816.90 per ounce.

The dollar index jumped to its highest level in two months against its rivals, making gold more expensive for holders of other currencies.

The benchmark 10-year yield rose to its highest level since June 4 at 1.594%, increasing the opportunity cost of holding non-interest bearing gold.

The Fed on Wednesday began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying and said the 15-month-old health emergency was no longer a core constraint on U.S. commerce.

Futures on the federal funds rate, which track short-term interest rate expectations, raised bets that the U.S. central bank will tighten monetary policy in early 2023 after Fed projections showed at least two rate increases that year.

Higher interest rates will dull gold’s appeal as they translate into a higher opportunity cost of holding it.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.1% to 1,045.78 tonnes on Wednesday.

Inflation expectations in Britain are well anchored around the Bank of England’s target of 2%, finance minister Rishi Sunak said after data showed inflation broke above the target for the first time in nearly two years.

Silver gained 0.6% to $27.14 per ounce, palladium eased 0.1% to $2,794.16, while platinum rose 0.1% to $1,123.50.

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