Inflation Fears Weigh Down Gold Prices Amid Higher Interest Rates

Gold prices dipped Rs 1,900/10 gram on Wednesday as investors assessed the possibility of major central banks keeping interest rates higher for longer to contain persistent inflation. In contrast, silver prices rose by Rs 1,400/kg.

The dollar remained close to a two-month high, putting pressure on bullion priced in US currency and making it more expensive for buyers holding other currencies.

Gold is often viewed as a hedge against inflation, but higher interest rates can reduce its attractiveness by increasing returns from interest-bearing assets. The Federal Reserve raised its benchmark interest rate by 25 basis points last week to 3.75%-4.00% and indicated another hike could come before the end of the year.