Gold prices experienced a decline for the fourth consecutive session on Wednesday, influenced by a strengthening US dollar and increasing expectations of a Federal Reserve interest rate hike. New US strikes against Iran fueled concerns about inflation driven by rising energy costs.
The spot price of gold decreased by 1.9% to $4,180.85 per ounce as of 01:06 Moscow time, marking its lowest point since March 23rd.
US gold futures also saw a dip, falling 1.9% to $4,204.75, as investors reduced their positions ahead of the release of crucial US Consumer Price Index (CPI) data scheduled for Wednesday.
On Tuesday, Washington launched further strikes on Iranian targets following the downing of a US military helicopter near the Strait of Hormuz. This development reignited worries about significant disruptions to global energy supplies.
Oil prices climbed by approximately 1% on Wednesday, intensifying fears that escalating fuel costs could fuel inflation and complicate the Federal Reserve’s policy decisions.
The prospect of persistent inflation has prompted investors to re-evaluate their expectations for US interest rate cuts.
Over 70% of market participants are now factoring in a Fed rate hike by December into their forecasts.
An increase in interest rates typically exerts downward pressure on non-yielding precious metals, as it raises the opportunity cost of holding them.
Treasury yields remained near multi-month highs, while the dollar maintained its strength in anticipation of the inflation data.
The DXY dollar index rose by 0.1% during the Asian session, staying close to a two-month peak reached earlier in the week.
Investors are closely monitoring the CPI figures for signs of accelerating inflationary pressures. Economists anticipate that annual consumer inflation will rise to around 4.2% in May, which would be the highest rate since April 2023 and could bolster expectations of the Fed maintaining a tight monetary policy.
Markets are also looking ahead to the Fed’s policy meeting on June 16-17, where the central bank is widely expected to keep rates unchanged but may issue more hawkish signals if inflation remains elevated.
Among other precious metals, silver prices dropped by 1% to $64.70 per ounce, while platinum depreciated by 3% to $1,678.60 per ounce.
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