Spot gold fell 1.7% to settle at $1,705.52. per ounce, after falling more than 2% in the session. US gold futures fell 1.9% to $1,703.30.
The dollar reached its maximum in 20 years, becoming the preferred safe haven amidst the growing economic risks of recent times, at the expense of gold.
“The strengthening dollar is pushing gold lower. Following the consumer inflation data, traders have raised their expectations from a 75 basis point rate hike to a 100 basis point hike,” hurting the Prayed, said Philip Streible, chief market strategist at Blue Line Futures in Chicago.
“Gold is unlikely to see a rally unless inflation deteriorates enough to stop interest rate hikes or other central banks start to be as aggressive as the Fed, and that may weaken the dollar.” Streible added.
Although considered a hedge against inflation, gold’s appeal tends to diminish when rates are high, as bullion does not earn interest.
Wednesday’s data showed that Consumer prices in the United States rose, marking the largest annual increase in inflation in 40-and-a-half years.
For his part, Christopher Waller of the Fed said that “the markets may have gotten ahead of themselves” in assessing a rate hike of 100 basis points for July. Weekly jobless claims in the United States rose for the second week in a row, suggesting some cooling in the labor market.
In physical markets, exports of spot gold jewelery from India, the second largest consumer, increased in May.
Meanwhile, spot silver fell 4.7% to $18.28 an ounce, platinum fell 1.2% to $844.95 and palladium fell 3.8% to $1,899.71.
Source: Ambito
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