Gold near three-week lows as bond and dollar rates remain high

Gold prices remained at a three-week low on Thursday, under pressure from the strengthening dollar and rising Treasury yields amid concerns that the Federal Reserve will continue to raise interest rates dramatically. At the morning spot, gold was down 0.1% to $1,627.04 per ounce. Prior to this, prices dropped to $1,624.98—their lowest level since September 28. At $1,632.60, U.S. gold futures were down 0.1%.

The Fed said on Wednesday in a report that showed businesses becoming more pessimistic about the future that economic activity in the United States had increased somewhat in recent weeks, despite being flat in some regions and declining in a few others.

The report may not do much to cool expectations for a fourth consecutive 75-basis-point rate hike next month given that the most recent data show inflation continuing to climb at more than three times the central bank’s 2% objective. Higher interest rates increase the opportunity cost of storing gold bullion, which reduces its value as an inflation hedge.

Data released on Wednesday revealed that consumer inflation in the eurozone was slightly lower in September than initially thought, but it remained extremely high, supporting market predictions of further rate increases before the year is through.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, saw a 6.08-ton decline in holdings on Wednesday, marking the greatest one-day outflow since July. Spot silver prices were down by 0.4% to $18.36 per ounce, platinum prices decreased by 0.6% to $878.52, and palladium prices decreased by 0.6% to $1,988.78.

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