Gold prices fall after Fed rate hike, dollar gains
Gold fell on Friday and posted a more than 1% fall for the week, dented by a stronger dollar and hawkish policy signals from major central banks even as recessionary fears loom.
U.S. gold futures fell 0.5% on Friday to $1,840.6. Gold futures closed down 1.86% week to date, posting its second negative week in three.
Spot gold fell 1.1% to $1,836.26 per ounce.
Making greenback-priced bullion less attractive, the dollar index rose on Friday, while benchmark U.S. 10-year Treasury yields also strengthened.
“The spectre of even more incoming U.S. rate hikes, following the Fed’s jumbo-sized 75 basis point hike this week, should cap bullion’s near-term upside,” said Han Tan, chief market analyst at Exinity.
Bullion’s appeal this week was hit by aggressive tightening measures from central banks from around the world to curb inflation, with the U.S. Federal Reserve delivering its biggest interest rate hike since 1994.
Inflation and economic uncertainties are usually supportive of gold, but higher interest rates increase the opportunity cost of holding non-yielding bullion.
“The pressure of rate hikes and the U.S. dollar has outweighed any safe-heaven demand (from recession concerns),” Bank of China International analyst Xiao Fu said.
Gold’s move has been closely linked to that of the dollar and bond yields recently, and according to analysts this has come despite a conducive backdrop of global economic uncertainty and China lockdowns.
Meanwhile, demand for physical gold remained tepid in top consumer China due to COVID-19 restrictions.
“If the odds of a U.S. recession continue rising as the Fed continues hiking interest rates in its quest to quell red-hot inflation, that could ultimately reinvigorate investor appetite for gold as a safe haven,” Exinity’s Tan said.
