On Wednesday, gold prices edged closer to a two-week low, driven by a robust US dollar and growing expectations of interest rate hikes, which dampened investor appetite. Spot gold experienced a decline of approximately 1.1%, settling at $4,067.72 per ounce after reaching an intraday low of $4,050.60. US gold futures also witnessed a downturn.
This downturn continues a trend of weakness in the gold market, with prices dropping in five out of the last six trading days and marking a third straight week of losses. Investors are particularly focused on the $4,000 per ounce mark, regarding it as a critical support level for gold prices.
The recent rise in the US dollar, which has hit its highest point in over a year, plays a significant role in the declining gold prices. A stronger dollar renders gold more costly for those purchasing with other currencies, thereby diminishing demand for the precious metal.
Additionally, the prospect of potential Federal Reserve interest rate hikes has exerted pressure on gold prices. Since gold does not yield interest, higher rates can make alternative investments more appealing, consequently reducing the demand for this traditionally safe investment.
As investors await the forthcoming US PCE inflation report, which could sway the Federal Reserve’s decisions on interest rates, concerns over energy disruptions in the Middle East have eased, further decreasing the demand for gold as a protective asset. Meanwhile, silver prices rebounded, rising about 0.8% to $61.12 per ounce, contrasting with gold’s ongoing struggles amid shifting market expectations.