Gold prices extended their decline on Wednesday and briefly fell below the psychologically important $4,000-per-ounce level.
A stronger U.S. dollar and growing expectations of additional Federal Reserve interest rate hikes reduced demand for the non-yielding precious metal.
Gold Price Falls Below $4,000
Spot gold declined 2.6% to approximately $4,007.72 per ounce by 09:42 ET. Prices briefly moved below $4,000 during the session.
U.S. gold futures fell 3% to around $4,026.90 per ounce.
Gold has now recorded losses in five of the past six trading sessions. The metal is also coming off three consecutive weekly declines.
Stronger Dollar Pressures Gold Prices
The U.S. Dollar Index climbed to a new 13-month high as traders increased their expectations for Federal Reserve rate hikes.
A stronger dollar makes gold more expensive for buyers using other currencies. This can weaken international demand for the precious metal.
Higher interest rates also increase the opportunity cost of holding gold because bullion does not provide interest or dividend income.
Fed Rate Hike Bets Continue to Rise
Market expectations for tighter U.S. monetary policy have increased following the Federal Reserve’s latest meeting and hawkish comments from policymakers.
Traders were pricing in a roughly 70% probability of an interest rate increase by September. Markets also expected another rate hike by December.
ING analysts said the stronger dollar and expectations that interest rates could remain elevated outweighed gold’s traditional safe-haven appeal.
Easing Middle East Concerns Reduce Safe-Haven Demand
Gold faced additional pressure as concerns about Middle East energy disruptions continued to ease.
Investors monitored diplomatic negotiations between the United States and Iran. Both sides have indicated progress toward a broader peace framework.
Such an agreement could help normalize energy shipments through the Strait of Hormuz and reduce fears of prolonged supply disruptions.
However, uncertainty remains over several important issues, including nuclear inspections and Iran’s access to frozen funds.
Gold Outlook Tied to Federal Reserve Policy
ING analysts said gold could continue to trade in line with expectations for Federal Reserve policy.
Persistent geopolitical risks may provide some support. However, higher Treasury yields and continued dollar strength could leave bullion vulnerable in the near term.
Investors are now awaiting the U.S. Personal Consumption Expenditures inflation report.
The PCE data, due on Thursday, could provide further clues about the Federal Reserve’s next interest rate decision.
Silver, Platinum and Copper Prices Move Lower
Silver traded near $61.12 per ounce after suffering a decline of more than 5% during the previous session.
Platinum fell approximately 1.2% to $1,634.81 per ounce.
Benchmark copper futures on the London Metal Exchange declined 0.3% to around $13,343.88 per metric ton.
U.S. copper futures also fell 0.6% to approximately $6.10 per pound.
