Gold prices experienced a significant drop to a more-than three-week low on Thursday, marking a fourth consecutive day in the red. The decline was driven by multiple warnings from Federal Reserve officials cautioning against expectations that the central bank had completed its interest rate hikes.
The precious metal faced continued pressure from a strengthening dollar and rising Treasury yields. Additionally, reduced safe-haven demand for gold contributed to the downward trend as markets factored in a lower risk premium associated with the Israel-Hamas conflict.
As of 23:41 ET (04:41 GMT), spot gold fell by 0.1% to $1,949.38 per ounce, while gold futures expiring in December dropped 0.2% to $1,954.30 per ounce. Both instruments showed losses exceeding 2% for the week.
The uncertainty surrounding the Federal Reserve persisted, with a series of officials emphasizing that U.S. interest rates would remain elevated for an extended period. This cautionary stance countered recent expectations that the Fed’s rate hike cycle had concluded, prompting traders to shift towards rate-exposed assets such as the dollar and Treasuries.
Federal Reserve Chair Jerome Powell’s speech on Wednesday offered limited insights into monetary policy, but his upcoming address on Thursday adds to the lingering uncertainty. While Powell’s recent comments have been interpreted as less hawkish, he maintained the stance that U.S. rates would remain elevated, emphasizing the need to address inflation.
The prospect of prolonged higher interest rates negatively impacted gold, as it increases the opportunity cost of investing in the metal, which yields no returns. Despite this, gold has seen an 8% increase in 2023, although it remains below the $2,000 per ounce level.
In the realm of industrial metals, copper prices also faced a decline on Thursday, extending recent losses due to signs of economic weakness in China, the top copper importer. Copper futures fell by 0.3% to $3.6258 a pound, following data indicating a contraction in both consumer and producer inflation in China for October. Concerns over slowing demand for copper intensified as economic indicators from other parts of the world signaled a broader economic slowdown.