Sept 22 (Reuters) – Gold prices fell as much as 1% on Thursday, as the U.S. dollar rallied and the Federal Reserve flagged more interest rate hikes, diminishing the zero-yielding metal’s appeal.
Spot gold fell 0.8% to $1,660.21 per ounce by 0615 GMT, not far from a more than two-year low of $1,653.10 touched last week. Bullion prices have declined 9% so far in the year.
U.S. gold futures were down 0.4% at $1,669.30.
“The stage setting from FOMC (Federal Open Market Committee) suggests that there’s quite a bit more room for real rates to keep going higher and that’s not an environment very gold-supportive,” said Ilya Spivak, a currency strategist at DailyFX.
The Fed hiked interest rates by 75 basis points on Wednesday for a third straight time and Chair Jerome Powell said bringing down inflation was their “overarching focus”.
The Fed also projected its policy rate rising at a faster pace and to a higher level than expected, the economy slowing and unemployment rising.
“The rapid pace of hikes is certainly going to weigh on gold prices, but eventually the concerns about growth and recession will come to the fore and lead to renewed buying interest in gold at lower levels,” said Sugandha Sachdeva, vice president of commodity and currency research at Religare Broking.
“Even as some more pressure is likely, we don’t foresee prices slipping below the $1,580 mark. The $1,620 to $1,580 area is likely to provide a floor to the metal.”
Even though gold is seen as a hedge against inflation and economic uncertainties, investors may favour other interest-yielding assets in a high-interest rate environment.
The dollar rallied to a new two-decade high, making the greenback-priced metal more expensive for buyers holding other currencies.
Spot silver dropped 1.1% to $19.37 per ounce, platinum slipped 0.6% to $901.86 and palladium fell 0.7% to $2,139.59.
(Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu)