Gold prices fell to their lowest levels in over a month as the U.S. dollar gained strength, driven by expectations of higher interest rates.
Spot gold declined by 0.1% to $1,897.91 per ounce as of 0700 GMT, hitting its lowest level since August 22 earlier in the session. U.S. gold futures also eased 0.2% to $1,915.90.
The U.S. dollar remained robust, reaching a 10-month high against major currencies, bolstered by elevated Treasury yields and the anticipation of prolonged higher U.S. interest rates.
Minneapolis Federal Reserve Bank President Neel Kashkari stated there is a 40% likelihood that the Federal Reserve will need to significantly raise interest rates to combat inflation.
Higher interest rates increase the opportunity cost of holding gold, a non-yielding asset priced in U.S. dollars.
The prevailing narrative of higher interest rates seems to be outweighing safe-haven demand for gold. More data, particularly the upcoming inflation and job reports, will be needed to justify the possibility that the Fed may not proceed with its last rate hike and could have greater flexibility for rate cuts if necessary.
The U.S. personal consumption expenditures (PCE) index, the Fed’s preferred measure of inflation, is set for release on Friday. The Labor Department will release the monthly employment report on October 6, followed by the Consumer Price Index (CPI) report on October 12.
U.S. consumer confidence declined to a four-month low in September, influenced by ongoing concerns about rising prices and increasing worries of a recession.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported holdings at a more than four-year low.
Spot silver dipped by 0.1% to $22.84 per ounce, hitting a 12-day low, while platinum gained 0.4% to reach $907.14.
Palladium broke a four-session losing streak, advancing by 1.4% to $1,240.65.
