(Bloomberg) — Gold declined, pressured by strength in the dollar and the prospect of less monetary easing as the war in the Middle East entered a sixth day with no sign of resolution.
Bullion fell as much as 1.7% in US trading as inflation worries stemming from higher energy prices lifted the greenback and Treasury yields. High inflation may prompt the Federal Reserve to hold rates steady or even hike them to contain price pressure. Swaps traders are currently pricing in about 35 basis points of rate cuts by year-end, compared with 60 basis points at the end of last week. That’s negative for bullion as it pays no interest.
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Some investors also sold gold for a source of liquidity to cover losses in the US equities market.
Some of the weakness in gold “looks driven by equity‑led risk‑on moves, particularly during the US session, with investors using gold as a source of liquidity rather than questioning the fundamentals,” said Ewa Manthey, a commodity strategist at ING Bank. “That pressure tends to ease once equity momentum fades, leaving the broader support for gold intact.”
Gold has gained about 17% this year, underpinned by heightened geopolitical and trade tensions as well as concerns about the Federal Reserve’s independence. The metal hit an all-time high above $5,595 an ounce in late January.
Spot gold fell to $ an ounce as of in New York. Silver dropped to $. Platinum and palladium slid.
–With assistance from Jack Ryan, Yihui Xie and Preeti Soni.
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