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Gold slumped more than 2% to a near one-year low on Thursday, as the dollar extended its sharp rally while expectations grew for a steep interest rate hike from the Federal Reserve.

Spot gold fell 1.8% to $1,704.87 per ounce by 1427 GMT. U.S. gold futures lost 2.1% to $1,698.90.

The dollar soared to a 20-year high, emerging as a preferred save haven amid growing economic risks of late, at gold’s expense.

“The stronger dollar is pushing gold lower. After the consumer inflation data, traders have increased their expectations from a 75 bps rate hike to a 100 bps rate hike,” hurting gold, said Philip Streible, chief market strategist at Blue Line Futures in Chicago.

“Gold will unlikely see any upside unless inflation deteriorates enough to stop interest rate hikes or if other central banks start to be as aggressive as Fed, and that can weaken dollar,” Streible added.

Although it is considered an inflation hedge, gold’s appeal tends to dim amid elevated interest rates since bullion yields no interest.

Building the case for a steep rate hike to tame inflation, data on Wednesday showed U.S. annual consumer prices surged, resulting in the largest annual increase in inflation in 40-1/2 years.

Gasoline, food drive US consumer prices higher in June

“A feature in the marketplace for some time has been the appreciation of the dollar… History suggests this phenomenon can remain in place for quite some time, only making the greenback stronger,” said Jim Wyckoff, senior analyst at Kitco Metals.

U.S. weekly jobless claims rose for the second straight week, suggesting some cooling in the labor market amid tighter monetary policy and financial conditions.

In the physical markets, second biggest bullion consumer India’s plain gold jewellery exports to the United Arab Emirates jumped in May.

Spot silver dipped 5% to $18.23 per ounce, platinum fell 1.9% to $838.34 and palladium slumped 4.6% to $1,884.96.

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