Gold Tumbles as Rate Hike Bets Fuel Stronger Dollar
The price of gold fell by over 1% on Wednesday to its lowest level in nearly a week, reaching $4,282.53 per ounce, as hawkish signals from Federal Reserve policymakers bolstered rate hike expectations and powered the US dollar to two-month highs.
Fed Chicago President Austan Goolsbee said that the US central bank may need to treat the current energy shock as a source of persistent inflation rather than expect it to dissipate on its own, adding to the hawkish tone this week. Richmond Fed President Tom Barkin and Boston Fed President Susan Collins also voiced support for last week's rate hike given concerns about inflation.
The higher dollar made greenback-priced bullion more expensive for holders of other currencies, putting gold under pressure. Peter Grant, vice president and senior metals strategist at Zaner Metals, said that 'post-FOMC Fed speak has been fairly hawkish. So the market is building in expectations of at least one more rate hike before the end of the year.'