Gold Prices Sink to New Lows Amid Fed Rate Hike Fears
Gold prices plummeted to $4,111 per ounce on Monday, marking their weakest level since August 5. This decline comes as US Treasury yields and expectations of further Federal Reserve rate increases weigh down demand for gold.
According to Adrian Ash, head of research at online bullion marketplace BullionVault, the new multi-decade highs in US borrowing costs have finally caused the gold price to weaken. Higher interest rates tend to pressure gold because investors can obtain better returns from interest-bearing assets, increasing the opportunity cost of holding gold.
US Commodity Futures Trading Commission data for the week ended September 22 showed money managers' net long positions in gold had declined to their lowest since late July, when bullion was trading near $4,000 per ounce. Gold-backed exchange-traded funds saw modest outflows of 1.6 metric tons last week.
While some support could come from continued central-bank buying and stronger Indian demand ahead of Diwali and the wedding season, historically high prices are likely to constrain jewellery demand among price-sensitive buyers, particularly farmers, amid a relatively weak Indian monsoon.