Gold hovered around a five-month low on Thursday, after data pointed to a resilient U.S. economy and raised prospects that the Federal Reserve may hike interest rates once more this year.
Spot gold was up 0.3% at $1,896.70 per ounce by 1144 GMT, trading near its weakest level since March 15 of $1,888.30. U.S. gold futures steadied at $1,927.80.
“Gold is being hit by a perfect storm with multiple negative factors arguably feeding on itself, which is self-reinforcing,” said independent analyst Ross Norman.
Minutes of the Fed’s July meeting released on Wednesday showed policymakers were divided over the need for more rate hikes, with “most” still prioritising the battle against inflation over risks to the economy.
The dollar withdrew 0.1% from a two-month peak, while 10-year Treasury yields hit their highest since October, as perceived recession risks also receded after robust U.S. retail sales and homebuilding data this week. [USD/] [US/]
A stronger dollar makes gold more expensive for overseas buyers, and higher yields also weigh on non-yielding bullion.
“In short, the gold market has been rattled,” Norman said, adding “whether the Fed actually carries through with a further rate hike in September is immaterial for gold as the damage has been done.” Investors are betting on a 37% chance of another hike in 2023, and a 58% chance of the Fed leaving rates unchanged for the rest of 2023, the CME FedWatch tool showed.
“Markets are looking for cracks in the U.S. labor market to really change the current trajectory and until such time, bullion may remain under pressure,” DailyFX analyst Warren Venketas wrote in a note, ahead of U.S. jobless claims data due at 1230 GMT.
Silver gained 1.6% to $22.75 an ounce, its biggest daily increase since July 31, while platinum rose 1% to $891.01 after touching its lowest level since October 20.
Palladium climbed 1.2% to $1,223.95.