Dollar rally saps gold's appeal as more Fed hikes loom
FILE PHOTO: A saleswoman shows gold bangles to a customer at a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Kolkata, India, May 3, 2022. REUTERS/Rupak De Chowdhuri
By Ashitha Shivaprasad
(Reuters) - Gold extended its selloff to an over nine-month low on Wednesday hurt by a stronger dollar, while the Federal Reserve's June meeting minutes established a more "restrictive" monetary policy.
Spot gold fell 1.4% to $1,738.99 per ounce by 2:52 p.m. ET (1852 GMT), after falling as much as 2.6% on Tuesday, largely unchanged after the release of the Fed minutes.
U.S. gold futures settled down 1.6% at $1,736.5.
The dollar hit a two-decade high, up 0.5%, emerging as the preferred refuge of late for investors looking to hedge growing recession fears, while also making bullion pricier for overseas buyers.
The Fed minutes saw participants justifying the 0.75-percentage-point increase and a likely increase of 50 or 75 basis points at its meeting later this month.
"Gold's price reaction has been rather muted as it had already started to price in a rising probability of another sharp rate hike in July," said Standard Chartered analyst Suki Cooper.
"In recent sessions, gold has succumbed to the risk-off sentiment as the dollar has benefited."
Rate hikes to fight soaring inflation raise the opportunity cost of holding bullion, which yields no interest.
"The hawkish Fed minutes which suggested an 'even more restrictive stance' provided no relief for metals markets," said Tai Wong, an independent metals trader based in New York.
"While a short-covering rally is possible if payrolls are soft, a lasting upturn (for gold) will require a softer U.S. CPI reading next week. That's needed to pull the Fed back from launching another massive tightening volley," Wong added.
More major central banks raised rates in June than in any month in at least two decades, Reuters calculations showed.
Spot silver rose 0.1% to $19.22 per ounce, platinum fell 1.2% to $855.02 and palladium fell 0.8% to $1,918.68.
(Reporting by Ashitha Shivaprasad, Arundhati Sarkar and Seher Dareen in Bengaluru; Editing by Shounak Dasgupta and Shailesh Kuber)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Altria tops first quarter sales on higher pricing, robust demand for smokeless alternatives
- EU court adviser backs data privacy activist Schrems in Meta fight
- Factbox-Top deals in the global mining sector
Create E-mail Alert Related Categories
ReutersSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!