Gold Slides as Higher Dollar, Bond Yields Weaken Sentiment

Gold prices extended losses on Thursday after last session’s more than 1% loss, as the continued surge of the US dollar and Treasury yields pressured the yellow metal amid concerns over the Federal Reserve’s aggressive rate hikes.

Spot gold traded 0.5% lower to $1,628.37 per ounce, having posted new three-week lows of $1,621.20 earlier, but later gained 0.2% to $1,633.24. US gold futures also dropped 0.02% to $1,633.85, before rising 0.2% to $1,637.65.

Other precious metals also stumbled. Spot silver was down 0.08% $18.44 per ounce, but later traded 0.2% higher to $18.51, while palladium shed 0.2% to $1,994.65. Platinum rose 0.3% to $886.47.

Fed Aggressive Rate Hikes to Keep Gold Under Pressure

Weakening investors’ interest in gold was a higher greenback and yields, with the dollar index adding 0.1% against its major peers before easing by 0.1%. The US 10-year Treasury yields climbed sharply to 4.14%, its highest level since late July 2008.

Currency strategist Ilya Spivak said the yellow metal’s overall trend had been down due to a parallel increase in the dollar and yields around the growing hawkish stance of the Fed.

According to Spivak, gold may trade above $1,600, with the US core personal consumption expenditures (PCE) data, set to be released next week, being the next significant turning point.

Serving as a sign of sentiment, the SPDR Gold Trust ETF slipped 6.08 tons on Wednesday, its largest single-day outflow since July 6.

The Fed stated in its latest Beige Book that US economic activity expanded modestly in recent weeks but saw flat progress in certain regions and a decline in others.

The central bank also noted inflation pressures have slightly wound down and may continue doing so, a soft sign that the Fed’s sharp rate hikes may be having an effect on the country’s decades-high inflation.

Still, the report did not significantly impact expectations for another 75-basis-point rate rise in November.

Gold can be an effective hedge against inflation and economic uncertainty, although higher US interest rates have raised the opportunity cost of investing in the yellow metal and increased the dollar. So far this year, gold has lost 11%.