Dollar Strength and Hawkish Comments Sink Gold Prices
Gold prices fell more than 1% on Wednesday as the US dollar rose to a nearly two-month high and interest rate expectations increased.
The dollar's strength, combined with higher oil prices, weighed on gold. The yellow metal also suffered from rising inflation pressures in the US economy, which typically leads central banks to hike interest rates.
A strong S&P Global report on US business activity revealed that growth accelerated for a fourth straight month in September, with both services and manufacturing output increasing. This solid rise in economic data pushed up rate hike expectations, with the CME FedWatch tool showing nearly 69% probability of a quarter-point hike in October.
Fed Governor Michael Barr's comments also contributed to the hawkish mood, as he stated that risks to achieving the central bank's long-term 2% inflation target had increased. He said further policy adjustments are likely needed to ensure inflation comes down to target in a timely fashion.