Gold slips to three-month low as Fed rate cues lift dollar

Dubai: Gold slipped to a near three-month low on Thursday as the dollar and Treasury yields advanced after the US Federal Reserve signalled more interest rate hikes this year.

Spot gold fell 0.7 per cent to $1,929.99 per ounce by 0710 GMT, hitting its lowest since March 17. US gold futures dropped 1.4 per cent to $1,941.50.

The Fed, in new economic projections, signalled that a stronger-than-expected economy and a slower decline in inflation will result in a likely rise in borrowing costs by another half percentage point by the end of this year.

“Where gold goes from here may depend on how long the hawkish remarks from the Fed Chairman continue to prop up US yields,” Tim Waterer, chief market analyst at KCM Trade said.

Traders are now pricing in a roughly 72 per cent chance of a Fed rate hike in July, according to the CME Fedwatch tool.

“(The) Fed has more or less given the market a direction,” said Brian Lan, of Singapore dealer GoldSilver Central.

The US dollar index climbed, making bullion more expensive for those holding other currencies.

Markets will now look ahead to a host of US economic data expected later, including the weekly jobless claims.

“We are also entering a seasonally slow period for physical demand, suggesting gold prices are more likely to drift lower in coming sessions barring a sharp slowdown in US economic data which could spur interest in the gold market,” Standard Chartered analyst Suki Cooper said.

The focus is also on the European Central Bank meeting, where it is expected to raise borrowing costs to their highest level in 22 years on Thursday and leave the door open to more hikes, even as the euro zone economy flags.

Spot silver fell 2.8 per cent to $23.2636 per ounce, platinum dropped 1.2 per cent to $963.72, and palladium lost 1.4 per cent to $1,366.44.