LONDON: Gold prices slipped 1% to a two-month low earlier on Wednesday as a rally in dollar on expectations of faster US rate hikes dented the appeal of greenback-priced bullion.
Spot gold was down 0.2% to $1,900.93 per ounce by 1209 GMT, having dropped to $1,886.09, a low since Feb. 25. US gold futures fell 0.1% to $1,901.30.
“We are in an environment which is definitely not the best one for gold,” said Carlo Alberto De Casa, external market analyst at Kinesis. He added that bullion is slowing down due to the strength of the US dollar and expectations of a hawkish Federal Reserve policy.
The dollar index, which measures its performance against a basket of six major currencies, scaled a post-March 2020 peak driven by the prospect of aggressive US rate hikes and safe-haven flows fanned by slowing growth in China and Europe.
“Inflation pressure can be positive for gold if central banks are unable to keep the rally of prices under control,” De Casa said.
Rising US interest rates increased the opportunity cost of holding non-yielding gold, while also boosting the dollar, in which it is priced. The greenback is also seen as a rival safe-haven asset to gold during economic and political crises.
“So, $1,900 is clearly a pivotal level for today’s session...Looking further out, it’s not looking ideal at the moment with the US dollar at a 25-month high,” trading firm City Index’s senior market analyst Matt Simpson said.
In other metals, spot silver rose 0.6% to $23.63 per ounce, platinum was up 0.9% to $929.14 and palladium jumped 2.7% to $2,244.73.
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