Sat, November 26, 2022

Gold prices hover to 4-week low on rate hike worries

Gold bars

On Monday, gold prices slipped to their lowest in four weeks. The downturn came amid the prospects of aggressive policy tightening by the US Federal Reserve, denting the precious metal’s appeal.

As of writing, bullion futures declined 1.92% or 36.70 points to $1,897.10 per troy ounce. The contract followed a drop of 0.71% to $1,934.30 per troy ounce last Friday.

Likewise, spot gold sank 1.53% or 29.16 points to $1,902.51 per troy ounce. It trailed its previous plunge of 1.12% to $1,929.73 per troy ounce.

Accordingly, analysts noted that fears about rate hikes had gotten the upper hand in the current trading session.

Market participants expect a half-percentage point interest rate hike at the Fed’s meeting in May. Then, traders piled into bets that the US central bank would go even more extensive in subsequent months to curb soaring inflation.

Remarkably, gold is susceptible to rising interest rates and higher yields. The conflicts increase the opportunity cost of holding non-yielding bullion.

The dollar climbed to a level last seen in March 2020. This upturn makes the greenback-priced gold costlier for other currency holders. Correspondingly, the USD index rose 0.44% to 101.65, nearing its highest level in two years.

In line with this, analysts set a three-month target of $1,850.00. It raises opinions that gold is expensive as a safe haven asset.

Nevertheless, the precious yellow metal is a safe store of value during an economic and political crisis. For instance, the war in Ukraine continues, approaching its third month.

Meanwhile, several experts anticipate inflationary pressures to ease. This move would take away some of the safe-haven demand for gold.

Gold, silver down on Monday

Like gold, silver futures inched down 2.63% or 0.62 points to $23.62 per troy ounce. It extended a slump of 1.47% to $24.26 per troy ounce last week.

The precious white metal also took a hit from the aggressive actions of the Fed. In addition, the reduced growth outlook for China outweighs silver’s medium-term attractions.

Similarly, palladium contracts significantly dwindled by 11.08% or 263.30 points to $2,113.00 per troy ounce.

This slump came after Russian metals producer Nornickel said that palladium output fell due to a high base effect. It reported a production of 706,000 troy ounces, representing a drop of 8.00%.

Furthermore, platinum also declined 2.29% or 21.05 points to $906.50 per metric ton.

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