Gold prices fell to their lowest in a week on Thursday as the minutes of the US Federal Reserve’s December meeting pointed to faster increases in interest rates, pushing up the US dollar and yields government bonds.
Spot gold fell 0.5% to $ 1,801 an ounce, after hitting its lowest level since Dec. 29 at $ 1,792.30. US gold futures fell 1.5% to $ 1,797.70.
In the United Arab Emirates, gold prices fell 3 Dh per gram on Thursday. The price of 24 karat gold was at 218.75 Dh per gram, down from 221.25 Dh the day before, while the 22 karat was at 205.0 Dh, 21 karats at 196.0 Dh and 18 carats at 168.0 Dh.
“Going forward, Fed sentiment will lead the way for gold and most likely maintain the exposed decline. If risk aversion intensifies, it will likely strengthen the dollar’s strength even if the rally in yields weakens “said Vijay Valecha, Chief Investment Officer. agent of Dubai-based investment brokerage firm Century Financial.
“In both scenarios, gold is expected to remain the loser and seems vulnerable to a pullback to the $ 1,760 to $ 1,770 region. In the UAE, the price of 24 karat gold is expected to trade between MAD 213 and 220 Dh in the coming days. “
Investors saw the U.S. Federal Reserve meeting minutes as a sign that the major lender may raise interest rates faster to calm inflation, which could lead to other central banks from other economies. to follow suit, noted the Dubai-based forex traders.
According to the minutes of the Fed’s December 14-15 policy meeting, policymakers believe the largest economy’s labor market is almost healthy enough and ultra-low interest rates are no longer needed.
Gold fell last year in its biggest annual decline since 2015, as central banks began to scale back pandemic-era stimulus to fight inflation. Higher rates can decrease demand for the metal because it does not pay interest.
The market interpreted that “there would most likely be a rise in March followed by quantitative tightening, which is very bad for stocks and gold,” said Jay Hatfield, managing director of Infrastructure Capital Management in New York. York.
Aggressive position of the United States
The Fed’s “very hawkish” minutes pushed the dollar and yields up significantly, which didn’t help gold, independent analyst Ross Norman said.
The US dollar resumed its rally to a recent 14-month high, as benchmark 10-year US government bond yields hit their highest level since April 2021.
The central bank minutes released on Wednesday showed officials discussed cutting overall US central bank holdings as well as raising interest rates earlier than expected to fight inflation, with an 80% probability of a plausible increase of a quarter of a percentage point in March. .
Some investors see gold as a hedge against higher inflation, but the metal is very sensitive to rising US interest rates, which increases the opportunity cost of holding unproductive bullion.
“Where the precious metal ends, the week is likely to be heavily influenced by key US employment data on Friday,” FXTM analyst Lukman Otunuga said in a note.
“A strong report could cripple gold bugs, paving a way down to $ 1,786 and $ 1,770. If $ 1,800 proves to be reliable support, prices could rebound to $ 1,810 and $ 1. $ 831. ” In other metals, spot silver fell 1.7 percent to $ 22.39 an ounce after falling to $ 22.12, its lowest level since Dec. 16.
Platinum fell 0.9% to $ 974.13 and palladium rose 0.9% to $ 1,880.94.