Gold fell more than 1 percent to a 10-1/2-month low on Thursday after the Federal Reserve sounded an unexpectedly hawkish note on US interest rates, sparking a surge in Treasury yields and sending the dollar to a 14-year high. Lifting the federal funds rate to a 0.50-0.75 percent range on Wednesday, the US central bank flagged a faster pace of hikes next year as it geared up for the incoming Trump administration's pledges to cut taxes and boost spending.
That sparked a rally in the dollar, pressuring assets priced in the currency, while US Treasury yields soared, lifting the opportunity cost of holding non-yielding gold. "The Fed was more hawkish than expected, which re-started this dollar rally," ABN Amro analyst Georgette Boele said. "With yields rising in the United States and the dollar massively up, that's the worst possible combination for gold."
Spot gold hit a 10-1/2-month low of $1,122.35 an ounce, and was down 1.2 percent at $1,130.72 by 3:03 pm EST (2003 GMT). US gold futures for February delivery settled down 2.9 percent at $1,129.80, showing a stronger decline as it had settled positive on Wednesday prior to the Fed statement. Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, are down about 10 percent from mid-November.
Meanwhile, silver was down 5.2 percent at $15.95 an ounce, after falling to hit its lowest since June 1 at $15.82. Platinum was 2.8 percent lower at $897.60, after falling to $885, the lowest since early February. Palladium was down 2.3 percent at $703, after sinking to a one-month low at $693.90.
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