Gold prices fall on Fed rate hike worries

September 25, 2023 (MLN): International gold prices fell on Monday as investors assessed the decision of the U.S. Federal Reserve officials regarding potential future interest rate hikes ahead of personal consumption expenditure (PCE) data due later this week.

International spot gold is currently trading at $1,922.22, down by 0.15% compared to the previous close.

To note, gold prices inched up by 0.09% last week, marking two consecutive weeks of appreciation.

Falling holdings of global gold exchange-traded funds (ETF) show that investing demand remains poor, said Praveen Singh, associate vice-president at Sharekhan, adding higher yields will pressure the precious metal, as Reuters reported.

SPDR Gold Trust, the world’s largest gold-backed ETF, said its holdings fell on Friday to their lowest level since January 2020.

Fed officials warned on Friday of further rate hikes even after voting to hold the benchmark rate steady last week, with three policymakers saying they remain uncertain about whether the inflation battle is finished.

Higher interest rates discourage purchases of non-interest-paying bullion, which is priced in dollars.

The dollar hovered around a more than six-month high, while benchmark 10-year Treasury yields were near their 16-year peak.

U.S. business activity showed little change in September, a survey published Friday showed, while a separate survey showed the eurozone economy is likely to contract this quarter and won’t return to growth anytime soon.

The Bank of Japan maintained ultra-low interest rates on Friday and pledged to bring inflation sustainably to its 2% target.

Investors await the PCE price index, the Fed’s preferred inflation gauge which lands on September 29, while also keeping an eye on events in Washington, where U.S. lawmakers are haggling over a spending bill with a Sept. 30 deadline to avert a potential government shutdown.

International spot silver is currently trading at $23.48, down by 0.33% on the day.

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