Gold prices extended their decline on Wednesday, falling to their lowest level in nearly two weeks as a strengthening US dollar and growing expectations of further US interest rate hikes dampened demand for the precious metal.
Spot gold slipped 0.7% to US$4,081.24 per ounce after earlier touching its weakest level since June 11, while August gold futures fell 1.2% to US$4,098.70.
The decline comes as traders increasingly bet that the US Federal Reserve could raise interest rates three times this year, a sharp shift from expectations of just one hike before last week’s policy meeting. A stronger dollar, which climbed to a more than one-year high, also made gold more expensive for overseas buyers and reduced the appeal of the non-yielding asset.
Market sentiment was further influenced by uncertainty surrounding the US-Iran peace agreement. US President Donald Trump said Iran had agreed to nuclear inspections “into infinity”, but Tehran denied making such a concession, raising doubts over the durability of the fragile deal. Both sides have also differed on terms related to Iran’s access to frozen overseas funds.
Ilya Spivak, head of global macro at Tastylive, said the market was witnessing continued pressure on gold as inflation concerns translated into rising bond yields, a stronger dollar and expectations of higher interest rates.
Investors are now awaiting the release of the US Personal Consumption Expenditures data on Thursday, the Federal Reserve’s preferred inflation gauge, for further clues on monetary policy.
Separately, RHB Investment Bank Research said bearish momentum in COMEX Gold appears to be strengthening after the metal fell US$53.30 to close at US$4,149.40 on Tuesday. The research house noted that weakening technical indicators suggest gold could extend its decline towards the US$4,000 support level, while US$4,400 remains the key resistance threshold. RHB maintained its negative trading bias and advised traders to keep short positions in place.
