Gold prices fell on Thursday as investors braced for more interest-rate hikes from the U.S. Federal Reserve, with focus now turning to inflation data due next week that could be an important factor for the central bank’s monetary policy plans.
Spot gold fell 0.5% to $1,865.60 per ounce by 2:09 p.m. ET (1909 GMT), going as high as $1,890.18 after U.S. jobless claims data. U.S. gold futures fell 0.7% to settle at $1,878.50.
Gold is trying to digest central bankers’ comments and how many further rate hikes we’re going to see, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
A few Fed officials said on Wednesday more interest rate rises were likely, with Richmond Fed’s Tom Barkin saying that “it just makes sense to steer more deliberately” as the U.S. central bank studies the impact of monetary policy on the economy and if inflation continues slowing.
Futures are pricing in the Fed’s target rate to peak at around 5.1% in July, about 25 basis points higher than last week.
Gold is extremely sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding the non-yielding asset.
The dollar index fell 0.6%. A weaker greenback tends to make dollar-priced bullion an attractive bet. However, benchmark 10-year Treasury yields firmed, weighing on gold.
“I’m anticipating that the next one week from Valentine’s Day will not have love for the markets,” Edward Moya, senior market analyst at OANDA, said.
Spot silver fell 1.2% to $22.06 per ounce, platinum dropped 1.4%, to $956.84, and palladium slipped 1.4% to $1,626.29.