Gold prices retreated below the key $2,000 level on Wednesday as the U.S. yields marched higher, with investors turning more sceptical over potential U.S. rate cuts likely later this year in the face of persistent inflation.
Spot gold was down 0.6% at $1,993.39 per ounce by 1010 a.m. EDT (1410 GMT), having shed as much as 1.8% to a two-week low of $1,969.09 earlier in the session. U.S. gold futures fell 0.7% to $2,005.80.
“Once gold breached that $2,000 mark, there were a lot of stop losses that were triggered,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
“Anytime you get earnings, you get a lot of people chasing individual stocks and that could also cause them to not invest so much in metal.”
The dollar strengthened, underpinned by U.S. yields climbing to a near one-month peak, with markets now pricing in an 85% chance of a 25-basis-points rate hike at the Federal Reserve’s May 2-3 meeting, according to CME’s FedWatch tool.
St. Louis Fed chief James Bullard said on Tuesday that the Fed should continue raising interest rates as recent data shows inflation remains persistent while the broader economy seems poised to continue growing, even if slowly.
A stronger dollar weighs on overseas demand for the greenback-priced gold, while higher rates blunt non-yielding bullion’s appeal.
The correction was due to the markets readjusting their expectations of the Fed’s rate-hike path, but gold’s rally has only been delayed, said Ole Hansen, head of commodity strategy at Saxo Bank.
Markets will scan more upcoming remarks by Fed officials this week, ahead of a blackout period that starts on April 22 before the central bank’s May 2-3 meeting.
Silver added 0.2% to $25.27 per ounce, platinum was mostly flat at $1,082.40, while palladium rose 0.5% to $1,616.74.
