Gold experienced a sustained decline for the third consecutive session on Wednesday as concerns over the appeal of non-yielding bullion grew amidst speculation that the Federal Reserve may maintain elevated interest rates. Additionally, traders are eagerly awaiting U.S. inflation data this week for further guidance.
Spot gold witnessed a significant drop of 1.4%, sliding to $1,874.34 per ounce as of 1:47 p.m. EDT (1747 GMT), marking its lowest point in over six months. U.S. gold futures followed suit, settling 1.5% lower at $1,890.90.
The anticipation of extended higher U.S. interest rates prompted investors to seek refuge in the safety of the dollar, thereby making gold more expensive for overseas buyers.
Adding to the headwinds facing zero-yield gold, Treasury yields remained near 16-year highs.
Ryan McKay, a commodity strategist at TD Securities, commented on the situation, stating, “As long as the narrative remains higher-for-longer, it’s going to continue pressuring precious metals. If the (inflation) data continues to come in stronger, that will be another thing that continues to weigh on gold.”
The U.S. personal consumption expenditures (PCE) index, which serves as the Federal Reserve’s preferred gauge of inflation, is slated for release on Friday. The outcome of this data will be closely monitored for potential impacts on gold’s trajectory.
However, ANZ analyst Soni Kumari pointed out, “If the inflation number falls, we could see some support coming to gold, and the expectation of tightening monetary policy could dampen a bit.”
Minneapolis Fed President Neel Kashkari shared his perspective on the U.S. economy, stating that a “soft landing” is more likely than not. Nevertheless, he noted a 40% chance that the Fed may need to significantly raise rates to combat inflation.
Despite these challenges, gold continued to find support from robust physical demand, particularly from central banks and China. Ryan McKay of TD Securities emphasized, “the near-term dynamics are certainly the Fed.”
In the silver market, prices witnessed a 1.7% decline, reaching $22.47 per ounce, marking a two-week low. Platinum also faced a substantial drop of approximately 2.2%, falling to $883.94, while palladium experienced a 0.3% decrease, reaching $1,219.48 per ounce.
