Prices of gold and other precious metals fell on Wednesday on the back of U.S. yields and a stronger home currency. The decline was due to speculation of a new interest rate hike next month amid continued inflation in the U.S. and other countries.
Gold and silver fell
as investors bet on another rate hike in May.
Gold prices fell more than 1% on the 19th as a number of investors became convinced that the U.S. Federal Reserve is likely to postpone a pause in interest rate hikes, which led to higher U.S. yields and a stronger U.S. dollar.
Spot gold was down 1.7% at $1970.31 per ounce by 12:00 GMT, while US gold futures were down 1.9% at $1982.20, according to Reuters. Gold was trading below its 21-day moving average around $1,990. At the same time, silver was down 1.9% at $24.73 per ounce and platinum was down 1.5% at $1,066.42.
Prior to the drop in precious metal prices, yields on the benchmark U.S. Treasury note rose for the first time in almost a month, increasing the value of the U.S. dollar and making gold less expensive for buyers paying in other currencies.
According to Ole Hansen, head of commodity strategy at Saxo Bank, the adjustment was due to the market readjusting its expectations for the Fed’s rate hike path. He expected gold to rise again once interest rates reach their peak.
On Tuesday, Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank should continue to raise rates amid persistent inflation; other Fed representatives are expected to comment ahead of the monetary authority’s May decision.
Meanwhile, eurozone inflation eased in March, but core indicators remain high, and members of the European Central Bank’s Governing Council said another rate hike is likely in Europe after their meeting in early May. The UK has the highest inflation rate in Western Europe, and the same can be expected from the Bank of England.
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