Gold loses shine as Fed rate hike looms

Bullion hit by 'triple headwind' as probability of another rate increases, dollar strengthens and equities rise

Dubai: Gold jewellery prices in Dubai have again declined as the bullion’s safe haven rally started to fade on heightened expectations of another interest rate increase by the United States (US) Federal Reserve.

The precious metal was retailing a lot cheaper on Sunday compared to recent peak prices, with the 24-karat selling at Dh149.50 per gram, down by Dh2.75 from a high of Dh152.25 more than a week earlier. Compared to Thursday’s rate, gold slipped by Dh1.25 per gram. Spot gold was down 0.03 per cent on Friday at $1,234.41 an ounce by 2.22pm EST, according to Reuters.

An analyst said on Sunday that the yellow metal has just been hit by a “triple headwind,” with the greenback strengthening, stocks moving higher and the probability of Fed rate hike rising to nearly 80 per cent.

The US dollar has recovered, rising to its highest level in seven weeks against a basket of currencies, as the yield on two-year government bonds rose to levels last seen in 2009. Also, equities moved higher on Wednesday following President Donald Trump’s speech.

Ole Hansen, head of commodity strategy at Saxo Bank noted that there have been heightened speculations that the Fed will raise the borrowing rates during the next policy meeting this month.

“The market focus has once again firmly switched towards the Fed’s next policy meeting on March 15. Several recent comments from voting members of the Federal Open Market Committee (FOMC) have raised the probability of a rate hike to more than 70 per cent, and the reaction in the market has been clear to see,” Hansen said in a note on Sunday.

He said that Trump’s infrastructure plan, signs of softening on immigration, coupled with strong manufacturing data, have helped boost stocks.

“Gold and silver have once again been hit by a triple headwind. The probably of a US rate hike [this month] has surged and, with it, we are seeing the dollar and bond yields moving higher.”

Gold Rate: To keep up to date with gold prices, go to our gold rate page.

Currency Rate: To keep up to date with latest exchange rates, go to our currencies page.

Loading...