Gold prices continued their decline for a third consecutive day on Thursday, influenced by the strengthening U.S. dollar and rising U.S. bond yields. This came in response to the Federal Reserve’s more hawkish stance on interest rates.
Spot gold dropped by 0.5% to $1,920.10 per ounce, briefly reaching its highest point since September 1 before closing lower in the previous session.
U.S. gold futures declined by 1.3% to $1,940.80.
The Federal Reserve opted to keep interest rates unchanged on Wednesday, but its updated quarterly projections indicated the possibility of further rate hikes later this year, with a commitment to maintaining a tight monetary policy through 2024.
Exinity’s Chief Market Analyst, Han Tan, noted that gold traders were influenced by the Fed‘s message of “higher-for-longer” interest rates, prompting gold bulls to temper their optimism.
The surge in the U.S. dollar to a six-month peak, coupled with benchmark 10-year Treasury yields reaching a 16-year high, weighed on the price of gold. As gold is a non-interest-bearing asset, it tends to lose appeal when interest rates rise.
However, Han Tan also highlighted that spot gold had only experienced limited post-FOMC (Federal Open Market Committee) declines, with some investors still considering Fed Chair Powell’s assertion that a U.S. rate cut “will come” eventually.
Market expectations suggest a 45% chance of another rate hike this year, while there is also a 40% probability that the Fed will ease in the first half of 2024, according to the CME FedWatch tool.
Gold’s performance in the near future may depend on a slowdown in the momentum of Treasury yields, noted Tim Waterer, Chief Market Analyst at KCM Trade.
Investor focus later in the day will be on the Bank of England’s policy decision, as it determines whether to halt a series of interest rate hikes initiated in December 2021.
In addition to gold, other precious metals also saw declines:
Silver fell by 0.3% to $23.17 per ounce.
Platinum slipped by 1.2% to $917.48.
Palladium experienced a 2.1% drop to $1,247.18, marking its worst session since August 30.
