Gold prices saw a notable decline on Wednesday, nearing a two-week low as the US dollar strengthened and expectations for higher interest rates dampened investor demand. Spot gold experienced a drop of approximately 1.1% to reach $4,067.72 per ounce, following an intraday low of $4,050.60. Similarly, US gold futures faced a downward trend.
This recent downturn extends a trend of weakness in the gold market, with prices falling in five of the past six trading sessions and marking a third consecutive weekly loss. Market participants are closely monitoring the $4,000 per ounce level, which is viewed as a critical support point.
The primary influence behind gold’s decline has been the US dollar’s rise to its highest level in more than a year. The stronger dollar increases the cost of gold for buyers using other currencies, subsequently reducing demand for the precious metal.
Additionally, market anticipation of potential Federal Reserve interest rate hikes has exerted pressure on gold prices. As gold does not yield interest income, higher rates can make other investments more appealing, thereby diminishing the demand for gold as a safe-haven asset.
Investors are now turning their attention to the upcoming US PCE inflation report, which could have implications for the Federal Reserve’s future interest-rate decisions. At the same time, easing concerns about disruptions to energy supplies from the Middle East have also lessened the demand for gold as a defensive investment. Meanwhile, silver prices reversed recent losses with a gain of about 0.8%, reaching $61.12 per ounce, even as gold remains under pressure in the face of shifting market expectations.