May 03, 2022 01:42AM ET
By: AnalysisWatch
Gold prices fell to their lowest level since mid-February on Tuesday as the high dollar exchange rate and the impending interest rate hike by the U.S. Federal Reserve diminished gold's appeal as an inflation hedge.
At 01:10 AM ET, spot gold was 0.3% lower at $1,858.10 per ounce. Gold bullion fell more than 2% on Monday to its lowest since Feb. 16 as the dollar and yields rallied on increased prospects for faster rate hikes by the Federal Reserve.
U.S. gold futures also fell 0.3% to $1,857.20.
There are near-term downside risks to gold, and we have a target range of $1,810 to $1,790, with pressure coming from higher interest rates and the dollar, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.
The dollar remained near 20-year highs, making gold less attractive to overseas buyers, while benchmark 10-year Treasury bond yields hit 3% on Monday for the first time since December 2018, a key psychological milestone.
The Federal Open Market Committee will begin its meeting on interest rates later today and is expected to raise borrowing costs by half a percentage point when it announces its decision on Wednesday.
The Federal Reserve raised its benchmark interest rate by 25 basis points in March and is likely to soon begin reducing its holdings of assets in an effort to tighten pandemic-era monetary policy and curb rising inflation.
Higher short-term U.S. interest rates and bond yields tend to increase the opportunity cost of holding zero interest rate bars.
The European Union was preparing to impose sanctions on Russian oil sales over its invasion of Ukraine after Germany, Russia's biggest energy buyer, reversed course on Monday.
Gold bullion is considered a safe store of value in times of economic and political crisis.
Spot silver was down 0.5% to $22.52 per ounce, platinum was down 0.1% to $934.94, and palladium was up 0.8% to $2,234.12.
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