Gold slips below $4,100 as dollar strengthens
Global gold prices fell below $4,100 as the dollar rose on Fed rate-hike bets, with investors awaiting US PCE inflation data
- Gold prices fell below $4,100 per ounce, primarily due to a strengthening US dollar which makes the metal more expensive for buyers using other currencies.
- Increased investor expectations of a US Federal Reserve interest rate hike are also pushing prices down, as higher rates make non-yielding gold less attractive.
- A sell-off in US technology stocks added to the pressure, as some investors sold gold to raise cash and cover losses in their portfolios.
Global gold prices extended their decline on Wednesday morning, slipping below US$4,100 per ounce as a stronger dollar and rising expectations of a US interest-rate increase continued to weigh on the precious-metals market.
Spot gold fell 0.8% to US$4,083.77 per ounce in early Asian trading (7.40am Singapore time / 6.40am Thailand time on Wednesday). The move followed a 1.7% drop in the previous session, which pushed gold to its lowest closing level in two weeks.
The earlier sell-off had already gathered pace on Tuesday, when spot gold dropped 1.4% to US$4,131.24 per ounce (1.50pm US Eastern time / 17.50 GMT on Tuesday; 12.50am Wednesday in Thailand). US gold futures for August delivery settled 1.3% lower at US$4,149.40 per ounce (Tuesday settlement; exact clock time not specified).
Rate-hike bets lift the dollar
The main pressure came from the US dollar, which rose to its highest level in more than a year on Tuesday. A stronger dollar typically makes gold more expensive for buyers using other currencies, reducing demand for the metal.
Bob Haberkorn, senior market strategist at StoneX, said gold and silver were “not really looking to the Middle East”, with markets focusing more closely on signals from the Federal Reserve.
Investors have sharply increased their bets on a rate hike after hawkish signals from new Fed chair Kevin Warsh, who has stressed the need to keep fighting inflation. Traders now see about an 86% chance of a Fed rate increase in December, up from 61% before last week’s Fed meeting, according to the CME FedWatch Tool.
Gold is often viewed as an inflation hedge, but higher interest rates usually work against it because the metal offers no yield. That makes gold less attractive when returns on interest-bearing assets rise.
US-Iran progress fails to support bullion
The dollar-driven pressure outweighed support from weaker oil prices, which softened after signs of progress in talks between the United States and Iran.
The United States waived oil sanctions on Iran for 60 days from Monday after the first talks under a developing peace agreement, although fighting in Lebanon continued.
S Vice President JD Vance said talks with Iranian officials in Switzerland had laid a strong foundation for a final peace deal, while tanker traffic through the Strait of Hormuz began to recover after earlier disruption.
Brent crude futures fell more than 1% on Tuesday, but the drop in oil prices was not enough to offset concern over a stronger dollar and tighter US monetary policy. Investors are now waiting for the US Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, due on Thursday, for clearer signals on the interest-rate path.
Tech sell-off adds to gold pressure
The pressure on gold intensified as a heavy sell-off in US technology stocks forced some investors to reduce bullion holdings to raise cash and cover losses elsewhere in their portfolios.
Although gold is widely regarded as a safe-haven asset, it can fall during broad market sell-offs because investors often use it as a source of liquidity. The latest decline came as US Treasuries gained and a dollar gauge strengthened 0.4% on Tuesday, while Asian equities were expected to extend losses on Wednesday amid concern that the AI-driven stock-market rally had become overheated.
The tech-stock retreat added to existing pressure from persistent inflation risk and concern that the Fed may need to raise interest rates. Warsh’s hawkish tone also overshadowed the positive impact of the temporary US-Iran peace agreement signed last week, as higher borrowing costs are generally negative for precious metals that do not pay interest.
Silver and other metals also retreat
Other precious metals also came under pressure.
In Tuesday’s Reuters market round-up, spot silver dropped 4.9% to US$61.98 per ounce, platinum fell 1.2% to US$1,657.92, and palladium slipped 2.6% to US$1,232.28 (Tuesday market update; individual clock times not separately specified).
By Wednesday morning, silver was down 1.1% at US$60.86 (7.40am Singapore time / 6.40am Thailand time), while platinum and palladium were also lower. The Bloomberg Dollar Spot Index was broadly steady at that time.
For now, gold’s next direction is likely to depend on whether US inflation data reinforces expectations of another Fed rate hike — or gives investors reason to believe the pressure from the dollar may start to ease.
