Gold Prices Retreat Amid Expectations of Interest Rate Hikes
Gold prices fell on Wednesday, and are now headed for their first monthly loss since March. The drop came as investors awaited US inflation data to gauge expectations of interest rate hikes from the Federal Reserve.
The spot price of gold dropped 0.2% to $1,706.63 per ounce by 01:50 GMT, having lost over six percent since the beginning of the month, according to Reuters. Meanwhile, US gold futures rose 0.5% to $1,721.90.
The dollar's strength is weighing on gold prices, making dollar-denominated metals more expensive for holders of other currencies. A key test for gold will come with the release of the US Personal Consumption Expenditures (PCE) price index data at 12:30 GMT.
Critical Metals' CEO Tony Sage noted that a weak reading in PCE data could support gold and pave the way for a return to the $4,200-$4,300 range. Conversely, a high reading could drive up yields and the dollar, placing renewed pressure on gold and testing the $4,100 level.
Higher interest rates typically reduce the appeal of gold as the metal does not generate a yield. The Federal Reserve raised interest rates by 25 basis points earlier this month, and traders see a 47% probability of another hike in October and a 91% probability of one in December, according to CME's FedWatch tool.