Gold Prices Fall to Two-Week Low as Stronger US Dollar Weighs on Market Sentiment
Gold prices extended their decline on Wednesday, falling to their lowest level in nearly two weeks and testing the key psychological support level of $4,000 per troy ounce. The precious metal came under pressure as the US dollar strengthened and growing expectations of further Federal Reserve interest rate hikes reduced the appeal of non-yielding assets.
Spot gold dropped 1.1% to $4,067.72 per ounce as of 12:42 WIB, after briefly touching an intraday low of $4,050.60 earlier in the session.
Meanwhile, US gold futures declined 1.6% to $4,083.60 per ounce.
Bullion has now posted losses in five of the last six trading sessions and recently recorded its third consecutive weekly decline, highlighting increasing bearish momentum in the precious metals market.
Stronger Dollar and Hawkish Fed Outlook Pressure Gold
The US Dollar Index (DXY) climbed to a 13-month high on Wednesday as investors increased bets that the Federal Reserve could raise interest rates as early as July, followed by another hike later this year.
A stronger US dollar makes gold more expensive for holders of other currencies, while higher interest rates increase the opportunity cost of holding non-interest-bearing assets such as gold.
Market participants significantly raised expectations for additional monetary tightening following last week's Federal Reserve policy meeting and a series of hawkish comments from Fed officials.
Current market pricing indicates approximately a 70% probability of a rate hike in September, with another increase fully anticipated by December.
“Strength in the US dollar and expectations that the Federal Reserve will keep interest rates higher for longer are outweighing safe-haven demand driven by geopolitical risks,” analysts at ING said in a market note.
Easing Middle East Supply Concerns Add to Downside Pressure
Gold also faced additional headwinds as concerns over potential energy supply disruptions in the Middle East continued to ease.
Investors are closely monitoring ongoing diplomatic efforts between the United States and Iran after both sides signaled progress toward implementing a broader peace framework aimed at normalizing energy flows through the Strait of Hormuz.
However, uncertainty remains over key issues, including nuclear inspections and access to frozen Iranian assets.
“While geopolitical risks remain elevated, gold is likely to continue trading in line with Federal Reserve expectations, leaving prices vulnerable to higher Treasury yields and a stronger US dollar in the near term,” ING analysts added.
Markets Await Key US PCE Inflation Data
Investors are now focusing on the upcoming US Personal Consumption Expenditures (PCE) inflation report scheduled for release on Thursday, which could provide fresh clues regarding the Federal Reserve’s future policy direction.
Other Precious Metals and Copper Performance
Among other precious metals, silver rebounded 0.8% to $61.12 per ounce after plunging more than 5% in the previous session.
Platinum slipped 1.2% to $1,634.81 per ounce.
In the base metals market, benchmark copper futures on the London Metal Exchange (LME) edged down 0.3% to $13,343.88 per metric ton, while US copper futures declined 0.6% to $6.10 per pound.