Gold prices fell for the fifth consecutive session on Thursday, hitting their lowest levels in eight weeks amid a surge in the U.S. dollar and rising Treasury yields. Uncertainty over the pace of the Federal Reserve‘s interest rate cuts also placed downward pressure on the yellow metal as investors shifted to higher-yielding assets.
In the UAE, gold rates fell AED5.50, with 24-carat gold dipping to AED310.50 and 22-carat gold recording AED287.50. Meanwhile, 21-carat gold fell AED5 to AED278.25 while 18-carat gold reached AED238.50.
Globally, spot gold was down 1.08 percent to $2,553.32 per ounce, as of 6:53GMT, after hitting its lowest since September 19 earlier in the session. U.S. gold futures fell 1.15 percent to $2,556.85. Gold prices hit an all-time high of $2,790.15 in late October, and since then they have persisted on a downward track.
Stronger U.S. dollar, treasury yield
The U.S. dollar rose to a one-year high, making gold more expensive for other currency holders, while treasury yield rose to its highest since July. The dollar’s rally intensified after U.S. consumer price index data on Wednesday showed that inflation remained sticky in October. While the reading saw traders raise bets on a December rate cut by the Fed, the longer-term outlook for rates grew more uncertain.
While yesterday’s inflation data suggests that the Fed might be able to lower rates next month, next year’s expectations include higher inflation and therefore fewer rate cuts.
“The specter of inflation has not fully disappeared – especially given a Trump presidency and potential inflationary pressures from pro-growth policies and tariffs,” stated Kareena Moledina, client portfolio manager, Janus Henderson Investors.
Rate cut projections
Focus today turns to the upcoming address by Fed chair Jerome Powell. Last week, Powell reiterated the central bank’s data-driven approach to further easing, after cutting rates by 25 basis points. Meanwhile, Fed officials remain cautious about future rate cuts, citing potential risks to inflation. Gold is considered a hedge against inflation, but higher interest rates dampen the appeal of holding the non-yielding asset.
“The Fed may argue that it is not swayed by political interference – but any policy changes will undoubtedly impact the U.S. economy. The Republican dominance in government could end up being inflationary,” added Moledina.
Currently, traders are pricing an 83 percent chance of a Fed rate cut next month, up from 62.4 percent yesterday, according to the CME FedWatch tool.
St. Louis Fed president Alberto Musalem expects inflation to gradually decline while Dallas Fed president Lorie Logan warned against excessive easing that could reignite inflationary pressures.
In his comments, Minneapolis Fed president Neel Kashkari signaled uncertainty over interest rates, stating that any increases in inflation could see the Fed pause its rate-cutting spree. The central bank cut interest rates by a total of 75 basis points in the past two months and will likely cut rates by 25 basis points in December. Several more Fed officials are speaking this week, most notably chair Jerome Powell on Thursday.
Investors are also awaiting the U.S. Producer Price Index (PPI) and weekly jobless claims data, both due at 13:30 GMT.
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Other precious metals
Amid the persistent decline in gold prices, spot silver fell 1.08 percent to $30 while platinum declined 0.42 percent to $933.50 and palladium lost 0.25 percent to $930.88.
Among industrial metals, copper prices extended recent declines, hitting a three-month low as negative sentiment over China’s outlook remained. Copper declined 0.05 percent to $4.06.
China’s recent round of fiscal measures largely underwhelmed traders who were hoping for more sector-specific measures to support private spending and the property market. The prospect of higher trade tariffs under Trump also dented China’s outlook. Beijing will likely outline more stimulus measures during two key political meetings in December. Focus this week is on Chinese industrial production and retail sales data, due on Friday, for more insight into the economy’s health.
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