Gold prices face worst month since September on looming Fed rate hike

The gold prices They stabilized on Monday but remained on track for their worst monthly performance since September as plans by the US Federal Reserve to raise interest rates have strengthened the dollar, drawing investors away from bullion.

At 10:15 GMT, spot gold was down 0.1% at $1,788.77 an ounce. US gold futures were up 0.2% at $1,789.60.

“The Fed’s hard line is unmatched by other major central banks, providing strong support for the dollar and a major headwind for gold.”, said the analyst Ricardo Evangelista of ActivTrades.

The dollar index fell slightly but remains on track for a monthly gain, limiting demand for gold as the appreciation of the US currency makes gold more expensive for investors with other currencies.

The US Federal Reserve plans to raise interest rates in March, on the assumption that the economy would not suffer major repercussions from the omicron variant of the coronavirus and will continue to grow at a healthy pace.

Although gold is considered a hedge against inflation, interest rate hikes would raise the opportunity cost of holding bullion, which does not pay interest.

Gold has lost around 2.1% so far this month, its biggest drop since September last year.

January provided a good example of what is driving gold, Julius Baer analyst Carsten Menke said, adding that there was initially a positive performance on heightened fears about inflation, but then the Fed and its view of a strong economy reversed. the trend and pushed prices back below $1,800.

“Our base case remains that the global economy is in recovery mode, which means that there is no strong case for safe-haven demand (…) and that is why prices should move down rather than up. , although we do not see a big downtrend”, he added.

Among other precious metals, palladium rose 1.7% to $2,416.37, heading for a monthly rise of almost 28%, silver gained 0.4% to $22.50 an ounce and platinum it added 0.2% to $1,009.41.

With information from Reuters