Gold falls to two-month low as dollar surge hurts appeal

GOLD slipped to a more than two-month trough on Wednesday as the dollar rallied on expectations of aggressive monetary policy tightening by the US Federal Reserve.

Spot gold fell 0.8% to $1,890.29 per ounce by 2:06 p.m. ET (1806 GMT), after dropping to $1,881.45, its lowest level since Feb. 24.

US gold futures settled down 0.8% at $1,888.7.

“There’s a flight to safety right now out of other currencies into US dollar... Gold bullion is going to struggle to rally between now and the US Federal Reserve meeting,” said Bob Haberkorn, RJO Futures senior market strategist.

The dollar index charged to its highest level since January 2017, fueled by expectations that the US central bank will be more hawkish than peers and safehaven flows fanned by concerns over slowing growth in China and Europe.

The Fed is expected to increase rates by 50 basis points at its May 3-4 meeting.

Rising US interest rates increase the opportunity cost of holding non-yielding gold, while also boosting the dollar, in which it is priced. The greenback is also seen as a rival safe-haven asset to gold during economic and political crises.

“We see few participants left with appetite to buy gold,” said analysts at TD Securities in a note. Spot silver fell 0.4% to $23.40 per ounce, having earlier touched a low since Feb. 15.

However, “silver demand (due to industrial offtake) this year appears on track to achieve a new high... This, along with limited supply growth, will result in a widening deficit in 2022,” analysts at Metals Focus said in a note.

Platinum fell 0.3% to $918.04 per ounce, while palladium rose 1.2% to $2,211.88.