Gold prices fell on Wednesday, wiping out earlier gains. This came after U.S. bond yields jumped after the minutes of the Fed’s last meeting. The meeting showed that the Fed might need to raise interest rates earlier than expected to curb inflation.
As of 15:21 EST, spot gold prices have fallen by 0.2% to $1,810.56 per ounce. US gold futures closed up 0.6% to $1,825.10.
According to the minutes of the Fed meeting on December 14-15, Fed officials said last month that the U.S. labor market is “very tight” and may need to raise interest rates earlier than expected and reduce asset holdings quickly.
After the release of the minutes of the Fed meeting, the probability that the federal funds’ futures will raise interest rates in March is 80%.
After the release of the minutes of the Fed meeting, the benchmark 10-year U.S. Treasury bond yield rose to its highest level since April 2021, while the dollar narrowed its decline.
Meanwhile, Spot silver fell 1.1% to $22.78 per ounce, platinum rose 0.9% to $980.53, and palladium fell 0.6% to $1,859.30.
Some investors see gold as a hedge against higher inflation. Still, gold prices are susceptible to rising U.S. interest rates because it increases the opportunity cost of holding non-yielding gold.
At the same time, Goldman Sachs stated that digital assets are more widely adopted. He stated that cryptocurrency Bitcoin would steal the market share of gold in 2022.
For a long time, Bitcoin has been called digital gold. Gold’s criticism often applies to Bitcoin: it does not pay interest or dividends. It does not imitate the performance of more traditional assets. Proponents say that Bitcoin, like gold, can prevent the systematic abuse of fiat currencies.