Gold price drops over 1% as another Fed rate hike looms
Gold fell more than 1% on Friday as the US dollar rose, giving up gains from bets for a slowdown in monetary tightening by the Federal Reserve later in the year as the immediate focus turned to an impending rate hike next week.
Spot gold was down 1.3% to $1,641.48 per ounce by 11:55 a.m. ET, on its way to another weekly loss. US gold futures also fell 1.3% to $1,644.00 per ounce in New York.
Meanwhile, the US dollar index edged higher by 0.2%, eroding the appeal of rival safe-haven gold, while also making it more expensive for overseas buyers.
Gold could see some correction due to an upside move in the dollar heading into the Fed meeting, expected to deliver a 75-basis-point rate increase, said Vandana Bharti, assistant vice-president, commodity research at SMC Global Securities, in a Reuters report.
Bets for rising rates overall have put gold on course for a seventh straight monthly fall.
“However, with the passing of time, recession fear is getting stronger and that could probably give a much-needed support to gold prices, and limit the downside,” Bharti added.
Helping drive some of gold’s gains this week, the Fed was seen slowing its aggressive rate-hike pace in December, amid some signs of a US economic slowdown.
But Jigar Trivedi, a senior analyst at Mumbai-based Reliance Securities, believes the outlook for gold still appears bearish with investment demand still weak and retail demand also not aggressive.
“Gold should trade in a range of $1,640-$1,660 till there is an outcome from the Fed,” Trivedi said.
