Sept 15 (Reuters) – Gold prices fell further on Thursday to their lowest in nearly two months, weighed down by a stronger dollar and expectations of big interest rate hikes from the U.S. Federal Reserve.
Spot gold was down 0.5% at $1,687.29 per ounce, as of 0457 GMT, after touching its lowest since July 21 at $1,688.55 earlier in the session. U.S. gold futures fell 0.6% to $1,698.80.
“The Fed needs to shock the economic system hard and the chance of a 100-basis-point rate rise is a very real possibility,” said Michael Langford, director at corporate advisory firm AirGuide.
The dollar index rose 0.2%, edging towards recent peaks, as hotter-than-expected inflation data boosted bets for even more aggressive monetary policy tightening by the Fed.
Fed funds futures are pricing in a 37% chance that the U.S. central bank will hike rates by 100 basis points at its policy meeting next week.
“A 100-basis-point rate rise will see gold break below $1,680/oz,” Langford said.
Gold is highly sensitive to rising U.S. interest rates as they increase the opportunity cost of holding the non-yielding bullion while boosting the dollar.
Meanwhile, International Monetary Fund chief Kristalina Georgieva said on Wednesday central bankers must be persistent in fighting broad-based inflation.
Spot gold is expected to fall into a range of $1,675-$1,679 per ounce, according to Reuters’ technical analyst Wang Tao.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.24% to 960.56 tonnes on Wednesday from 962.88 tonnes on Tuesday.
“Outflows from gold-backed exchange traded funds suggest investors are reluctant to hold the precious metal in the short term,” analysts at ANZ said in a note.
Among other precious metals, spot silver dropped 1.2% to $19.45 per ounce, platinum fell 0.6% to $900.26 and palladium was down 0.5% at $2,153.01.
(Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu)
