Gold prices fell sharply on Thursday, pressured by a stronger US dollar and growing expectations that the Federal Reserve will raise interest rates more aggressively in the coming months. The dollar index, which measures the greenback against a basket of six major currencies, rose to its highest level in over a decade, making gold more expensive for holders of other currencies.
The prospect of higher interest rates also weighed on gold, which typically struggles to compete with yield-bearing assets when borrowing costs rise. Investors are increasingly pricing in a faster pace of rate hikes by the Fed in response to a strengthening US economy and rising inflation.
“Gold is facing headwinds from both a stronger dollar and rising interest rates,” said a senior market analyst at a leading investment firm. “The market is anticipating a more hawkish stance from the Fed, which is diminishing the appeal of gold as a safe-haven asset.”
Spot gold was down 1.5% at $1,129.80 per ounce, while US gold futures fell 1.7% to $1,134.20 per ounce.
Other precious metals also declined, with silver down 2.2%, platinum down 1.8%, and palladium down 1.4%.
Factors Influencing Gold Prices:
- US Dollar Strength: A stronger dollar makes gold more expensive for international buyers.
- Interest Rate Hikes: Rising interest rates increase the opportunity cost of holding gold.
- Inflation Expectations: Higher inflation can sometimes support gold prices, but the impact is often offset by expectations of tighter monetary policy.
- Economic Growth: Strong economic growth can reduce demand for safe-haven assets like gold.
Analysts expect gold prices to remain under pressure in the near term as the Fed is widely expected to raise interest rates at its upcoming meeting. However, some believe that gold could find support later in the year if economic growth slows or geopolitical risks increase.
