Gold prices fell on Wednesday, as the US dollar and Treasury yields jumped after upbeat economic data bolstered expectations that the Federal Reserve will maintain its stance to hike interest rates aggressively.
Spot gold fell 0.2% to $1,698.56 per ounce by 0743 GMT, having dropped to its lowest level since Sept. 1.
US gold futures dipped 0.3% to $1,708.60.
“ISM services reading reminded investors that there is still some underlying momentum for this economy and it really kind of opens the door for the Fed to be even more aggressive with fighting inflation,” said Edward Moya, senior analyst with OANDA.
“The move in Treasuries is rather concerning and it could really keep the pressure on gold.”
The US services industry picked up again in August for a second straight month amid stronger order growth and employment, survey by the Institute for Supply Management showed on Tuesday.
The data boosted the greenback, with the dollar index scaling a fresh 20-year peak, making gold more expensive for overseas buyers.
Benchmark US 10-year Treasury yields rose to their highest level since June 16.
The Fed is largely expected to deliver a 75 basis point rate increase on Sept. 21. The US central bank has raised its benchmark overnight interest rate by 225 basis points in total since March to fight soaring inflation.
Higher US interest rates and yields increase the opportunity cost of holding bullion, which is also used as a hedge against inflationary pressures.
“If gold breaches $1,680 level we can expect a move towards $1,620… We are expecting another low for gold and silver in the coming days,” said Vandana Bharti, assistant vice-president, commodity research at SMC Global Securities.
Indicative of sentiment, holdings of SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, fell 0.21% to 971.05 tonnes on Tuesday from Friday.
Spot silver fell 0.2% to $18.02 per ounce, platinum rose 0.4% to $856.21 and palladium was 0.4% lower at $1,998.06.