Gold Hits 1-Month Low as Fed Plans More Rate Hikes

Investing.com – Gold prices hit one-month lows on Thursday, breaking decisively from the key $1,200 support, a day after the third U.S. rate hike for the year and the Federal Reserve’s indication of plans for more.

December traded down 0.91%, or $10.90, at $1,188.20 by 2:30 PM ET (14:30 GMT) on the Comex division of the New York Mercantile Exchange. The contract earlier hit $1,185.60, its lowest level since Aug. 24.

Bullion’s slide also came as the U.S. dollar, subdued earlier in the week, rallied in response to the Fed’s intent to raise rates further.

The , which measures the greenback’s strength against a basket of six major currencies, was up 0.63% at 94.47. The prospect of more rate increases and higher U.S. bond yields raise the appeal for the dollar, while dampening that for gold, which offers no yield. A higher dollar also raises the cost of buying gold for holders of other currencies as the commodity is priced in the greenback.

The Fed raised interest rates by a quarter point to 2.25% on Wednesday, executing its third hike since January and eighth since 2015. The central bank indicated in its statement most members in December, then three more in 2019 and one in 2020.

“We don’t see any redemption for gold right now because nobody is going to stand in front of the Fed to bid it up,” said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.

With Wednesday’s break below $1,188, a level Pehowich said “had been very good support”, he foresaw December gold making a test toward $1,100.

“I think we could reach $1,160 next, and possibly lower with the dollar rising, the economy being favorable and the stock market making new highs almost every day,” he said.

In its policy statement issued with Wednesday’s rate hike, the Fed dropped the word “accommodative” that it had used for years to describe monetary direction as it kept rates near zero in the aftermath of the financial crisis. The central bank, however, said the amended language did not mean a change in its aim to normalize monetary policy.

Fed Chairman Jerome Powell also told a news conference after the rate hike that he did not expect inflation to surprise to the upside.

Elsewhere in metals trading, December was down 1.3% at $14.31 an ounce, January slid by 1.8% to $814 and gained 0.7% to 1,070.

Among base metals, December shed 2.1% to $2.768 a pound.

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