Gold Prices: Bullion Falls to More Than One-Week Low as Dollar Strengthens

TOKYO: Gold prices declined on Thursday, touching their lowest level in more than a week, as stronger-than-expected US inflation data and hawkish comments from Federal Reserve officials boosted the dollar and reinforced expectations of an interest-rate increase next month.

Spot gold fell 0.2 per cent to $3,977.99 per ounce by 0506 GMT, after touching its lowest level since November 4 earlier in the session. US gold futures for December delivery also declined 0.4 per cent to $3,983.20 per ounce.

The US dollar climbed to a 19-month high against major currencies on Thursday, making dollar-denominated gold more expensive for buyers holding other currencies.

Ilya Spivak, head of global macro at Tastylive, said gold had experienced a significant pullback over the previous several days following the US inflation data and rising expectations of interest-rate increases. However, he noted that the market was struggling to sustain further downward momentum.

Expectations of a half-percentage-point Federal Reserve rate increase next month strengthened after data released on Tuesday showed that US inflation accelerated more than expected in October. Policymakers also signalled a willingness to tighten monetary policy more aggressively.

PSX Gains: KSE-100 Rises Nearly 900 Points in Early Trading

According to the CME FedWatch tool, traders were fully pricing in an interest-rate increase next month and another in March next year.

Although gold is traditionally considered a hedge against inflation, higher interest rates increase the opportunity cost of holding non-yielding bullion, making the metal less attractive to investors.

Market participants are now awaiting the US Producer Price Index (PPI) report, scheduled for release on Friday, for further indications about inflation and the Federal Reserve’s policy outlook.

Analysts at OCBC said near-term risks remained balanced, with oil prices, bond yields and the US dollar continuing to influence gold’s direction. They added that although the broader economic environment had become less favourable for the metal, they remained positive about its medium-term prospects.

Among other precious metals, spot palladium rose 0.5 per cent to $1,032.63 per ounce on Wednesday, after reaching its highest level since October 22.