Gold prices fell more than 1% on Wednesday as hawkish Fed signal boosted dollar

Gold prices fell more than 1% on Wednesday to a near one-week low. (Reuters)

[Financial Channel/Comprehensive Report] Gold prices fell more than 1% on Wednesday to a nearly one-week low as Federal Reserve policymakers released hawkish signals, boosting market expectations for interest rate hikes and driving the U.S. dollar to a two-month high, putting non-yield-yielding gold under pressure.

Spot gold fell 1.7% to $4,282.53 an ounce, having earlier hit its lowest price since September 17.

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U.S. gold futures for December delivery closed down 1.3% at $4,318.40 an ounce.

Peter Grant, vice president and senior metals strategist at Zaner Metals, said: "The strength of the U.S. dollar is putting pressure on gold, and officials' comments after the Fed meeting were quite hawkish. So the market is gradually pricing in expectations of at least one more interest rate hike before the end of this year, and this is putting gold under pressure."

The U.S. dollar rose to a two-month high, making dollar-denominated gold more expensive for investors holding other currencies.

Federal Reserve policymakers struck a hawkish tone this week. Chicago Fed President Austan Goolsbee said the Fed may need to view the current energy shock as a source of persistent inflation rather than expecting the shock to subside on its own.

Richmond Fed President Tom Barkin and Boston Fed President Susan Collins also expressed support for the Fed's decision to raise interest rates last week after considering concerns about inflation.

The comments follow comments from other Fed officials who have broadened their concerns about inflation. While gold is a traditional anti-inflation asset, rising interest rates could make gold less attractive compared to interest-generating assets.

According to the Chicago Mercantile Exchange's (CME) FedWatch tool, traders see a 77% chance of a rate hike in October and a 95% chance of a December rate hike.

Since the outbreak of the U.S.-Israeli war against Iran at the end of February, gold and oil prices have almost shown an inverse relationship; as energy prices rise, the market is worried about inflation and central banks adopt tighter monetary policies, putting gold under pressure.

In terms of other precious metals, spot silver fell 3.9% to $64.45 an ounce; platinum fell 5% to $1,741.83; and palladium fell 3.7% to $1,259.24.

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