Gold prices fell on Thursday, as the US dollar and Treasury yields rebounded after comments from Federal Reserve officials pointed to aggressive interest rate hikes despite signs of slowing inflation in the world’s largest economy.
Spot gold was down 0.4% at $1,784.88 per ounce, as of 0253 GMT, after hitting its highest since July 5 at $1,807.79 on Wednesday.
US gold futures dipped 0.7% to $1,800.20.
“Following US inflation numbers the dollar sold off very sharply and yields also dropped, but by the end of the day, the bond yields came back up and the dollar is slightly stronger now, which is hurting gold,” said Edward Meir, an analyst with ED&F Man Capital Markets.
“Also, Fed officials said they still need to raise rates, which are bearish for gold. We could see a pullback in gold prices in the short-term towards $1,780.”
The dollar regained some footing to trade up 0.2% at 105.420, after falling to its lowest since June 29 at 104.630 on Wednesday. Benchmark US 10-year Treasury yields also rebounded to 2.7910%.
Data showed US consumer prices did not rise in July due to a sharp drop in the cost of gasoline, lifting hopes that the Fed would be less aggressive on their tightening plans going forward.
However, Minneapolis Fed Bank President Neel Kashkari said that he continues to believe that the US central bank will need to raise its policy rate to 3.9% by year-end and to 4.4% by the end of 2023 to fight inflation.
Chicago Fed President Charles Evans remained more hawkish than financial markets, expecting that US rates will top out at 4% next year.
Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.
Elsewhere, spot silver fell 0.6% to $20.44 per ounce, platinum rose 0.2% to $943.83, and palladium gained 0.2% to $2,243.24.