Gold ticks lower on firmer dollar after Fed cranks up rates

Thu Jun 16 2022
Lucy Harlow (4100 articles)
Gold ticks lower on firmer dollar after Fed cranks up rates

Gold prices inched lower on Thursday, as the dollar recovered slightly after a large but widely expected interest rate hike by the U.S. central bank sent the currency tumbling in the previous session.

Spot gold fell 0.1% to $1,831.63 per ounce, as of 0235 GMT, while U.S. gold futures rose 0.8% to $1,833.40.

The conflicting currents of support from potential safe-haven demand and inflationary hedge buying versus pressure from a higher interest rate regime are keeping gold prices balanced, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

Higher short-term U.S. interest rates and bond yields increase the opportunity cost of holding bullion, which yields no interest.

The U.S. Federal Reserve on Wednesday approved a 75-basis-point interest rate hike, its largest in more than a quarter of a century, to stem a surge in inflation, and flagged a slowing economy.

“Gold has been remarkably range-bound for weeks now (despite major news)… and it’s a real head-scratcher for traders at the moment to work out what exactly will drive gold out of this range,” McCarthy said, adding the dollar’s overall upward trend presented a cautious outlook for gold.

The Fed’s announcement drove longer-dated U.S. government bond yields lower and nudged the dollar off two-decade highs, which took gold as much as 1.9% higher in the previous session.

Meanwhile, Asian stocks rose on Thursday, carrying momentum from a global equities rally overnight.

However, key investors with big positions in gold know that the economic outlook is still challenging and still prefer to hold bullion as a safe-haven asset, said Brian Lan, managing director at dealer GoldSilver Central.

Spot silver firmed 0.1% to $21.67 per ounce, platinum gained 0.2% to $940.98, and palladium rose 0.5% to $1,870.79.

Lucy Harlow

Lucy Harlow

Lucy Harlow is a senior Correspondent who has been reporting about Commodities, Currencies, Bonds etc across the globe for last 10 years. She reports from New York and tracks daily movement of various indices across the Globe