“The Federal Reserve is maintaining its hawkish messages for the moment, despite the drop in growth prospects, and in turn, without a downgrade on the horizon, it will be very difficult for speculators to move their capital into gold,” said Daniel Ghali, a commodity strategist at TD Securities.
The Fed raised rates by half a percentage point on Wednesday, as the market expected, but bullion fell as low as 0.8% after US central bank president Jerome Powell’s comments indicated that the Fed expects interest rates to stay high for longer.
“Inflation data received so far in October and November show a welcome slowdown in the pace of price increases, but substantially more evidence will be needed to give confidence that inflation is on a sustained downward trajectory,” Powell said.
Gold is traditionally viewed as a hedge against inflation, but higher rates reduce the bullion’s appeal by increasing the opportunity cost of holding the non-interest-bearing gold metal.
The European Central Bank and the Bank of England also raised interest rates by half a percentage point on Thursday and indicated that more hikes were likely.
The dollar was up 0.99% against a basket of six major currencies, making gold more expensive for holders of other currencies.
Among other precious metals, silver sank 3.4% to $23.08 an ounce; platinum lost 2.3%, to $1,005; and palladium fell 4.4% to $1,831.63.
Source: Ambito
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