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Gold broods over US Fed’s higher-for-longer rate hike stance

December 15, 2022By Reuters

Dec 15 (Reuters) – Gold prices on Thursday fell by as much as 2% to their lowest in about a week as the dollar advanced after the US Federal Reserve said it will deliver more interest rate hikes next year.

Spot gold dropped 1.6% to USD 1,777.88 per ounce, as of 1:46 p.m. ET (1846 GMT), having earlier slid to a low of USD 1,771.89. US gold futures settled 1.7% lower at USD 1,787.80.

“The Fed is maintaining its hawkish messaging for the time being, despite the declining growth outlook, and in turn without a cut on the horizon, it’ll be very difficult for speculators to move their capital towards gold,” said Daniel Ghali, commodity strategist at TD Securities.

The Fed on Wednesday raised interest rates by 50 basis points as expected, but bullion fell as much as 0.8% after comments from Fed Chair Jerome Powell indicated that the US central bank expected interest rates to stay higher for longer.

“The inflation data received so far in October and November show a welcome reduction in the pace of price increases, but it will take substantially more evidence to give confidence inflation is on a sustained downward path,” Powell had said.

Bullion is often considered a hedge against big spikes in consumer prices, but interest rate hikes may curb inflationary pressures while also reducing the appeal of non-yielding gold.

The European Central Bank and the Bank of England also raised their key interest rates by half a percentage point on Thursday and indicated that more hikes were likely.

Making gold more expensive for other currency holders, the dollar rose 0.9%.

Gold and silver prices are sharply lower “on profit-taking pressure from the shorter-term futures traders, after recent gains,” Jim Wyckoff, senior analyst at Kitco Metals said.

Elsewhere, silver dipped 3.4% to USD 23.07 per ounce, platinum fell 2.8% to USD 1,000.01 and palladium was down 7.4% at USD 1,775.89.

(Reporting by Kavya Guduru in Bengaluru; Editing by Barbara Lewis, Elaine Hardcastle and Shounak Dasgupta)


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