Gold prices continued their downward move on Wednesday, hovering close to a two-week low and approaching the key $4,000-an-ounce threshold. The decline came as the U.S. dollar strengthened and investors increased expectations that the Federal Reserve could raise interest rates again in the coming months, reducing demand for the non-yielding asset.
Spot gold was down 1.1% at $4,067.72 per ounce by 05:42 ET (09:42 GMT), having earlier touched an intraday low of $4,050.6 per ounce.
U.S. Gold Futures fell 1.6% to $4,083.60.
The precious metal has now posted losses in five of the past six trading sessions and is also on the back of three consecutive weekly declines.
The U.S. dollar index (DXY) reached its highest level in 13 months on Wednesday as investors increasingly anticipated Federal Reserve rate increases, potentially beginning in July and continuing later in the year. A stronger dollar raises the cost of gold for overseas buyers, while higher interest rates reduce the attractiveness of holding bullion.
Investor expectations for tighter monetary policy have strengthened since last week’s Federal Reserve meeting and subsequent hawkish remarks from policymakers.
Markets are currently assigning around a 70% chance of a rate increase by September and are fully pricing in an additional hike by December.
“A stronger US dollar and expectations that the Fed could keep rates higher for longer outweighed safe-haven support from geopolitical risks,” ING analysts said in a note.
Gold was also pressured by easing concerns surrounding potential disruptions to energy supplies in the Middle East.
Market participants continued to follow diplomatic discussions between the United States and Iran after both countries indicated progress toward implementing a broader peace framework aimed at restoring smoother energy flows through the Strait of Hormuz.
Nevertheless, uncertainty persists regarding several key issues, including nuclear inspections and access to frozen Iranian assets.
“While geopolitical risks remain elevated, gold is likely to trade in line with Fed expectations, leaving prices vulnerable to higher yields and a stronger dollar in the near term,” analysts added.
Attention is now turning to the U.S. Personal Consumption Expenditures (PCE) inflation report due on Thursday, which could provide additional insight into the Fed’s future policy direction.
Among other precious metals, silver gained 0.8% to $61.12 per ounce after falling more than 5% in the previous session.
Platinum declined 1.2% to $1,634.81 per ounce.
In base metals, benchmark copper futures on the London Metal Exchange slipped 0.3% to $13,343.88 per tonne, while U.S. copper futures fell 0.6% to $6.10 per pound.