Thursday, October 28

Gold falls 1% on fears of sooner-than-expected Fed rate hike

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Gold fell 1% on Thursday, pressured by an overall uptick in appetite for riskier assets, as investors continued to position themselves for a sooner-than-expected interest rate hike from the US Federal Reserve.

Spot gold declined 1% to $1,749.61 per ounce by 1451 GMT and US gold futures fell 1.6% to $1,750.70.

“The Fed’s comments from Wednesday are overshadowing anything at this point,” said Bob Haberkorn, senior market strategist at RJO Futures, adding that the comments also outweighed any likely support from an unexpected rise in US weekly jobless claims.

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“Unless there’s a major event, the path of least resistance in gold prices is down due to the hawkishness of the Fed,” Haberkorn said.

The US central bank said on Wednesday it will likely begin reducing its bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected, as the Fed’s turn from pandemic crisis policies gains momentum.

Weighing on safe-haven assets, Global equities advanced helped by fading concerns over China’s Evergrande and as investors largely brushed off concerns over the Fed’s tapering plans.

Bullion also found little support from a retreat in the dollar, which usually buoys demand for gold since it makes the metal cheaper for those holding other currencies and as it competes with the precious metal as a safe-haven asset.

A Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

While higher rates usually impact gold negatively, investors will have a foot in gold’s door as a precaution given the continuing bubble in the equities and bond market, said Vincent Tie, sales manager at Singapore dealer Silver Bullion.

Platinum edged 0.1% lower to $995.50 per ounce, while palladium shed 1.7% at $1,989.64, after a two sessions of gains.

Silver fell 0.3% to $22.61.

(Reporting by Bharat Govind Gautam, Arundhati Sarkar and Eileen Soreng in Bengaluru; Editing by Amy Caren Daniel)