Gold Weakens Due to Pressure from the US Dollar and Hawkish Fed Signals
Gold prices weakened on Thursday (June 18th) due to pressure from the Federal Reserve's hawkish signals and a strengthening US dollar. Spot gold fell 0.6% to $4,232.01 per ounce, while US gold futures weakened 3.1% to close at $4,245.90.
The main pressure came after the Fed kept interest rates unchanged but indicated that some policymakers still see the need for a hike by the end of the year. Of the 19 Fed officials, nine predicted a rate hike would need to be made, leading the market to increasingly price in the risk of tighter monetary policy.
The US dollar strengthened to a one-year high after the Fed statement. This pressured gold as dollar-priced bullion becomes more expensive for foreign buyers. As a non-yielding asset, gold also tends to be less attractive when interest rate and yield expectations rise.
The market now rates an 88% chance of a US interest rate hike in December, up from 61% before the Fed statement, according to the CME FedWatch Tool. Peter Grant of Zaner Metals believes the most significant change was the Fed's hawkish tone, which pushed the dollar to its highest level this year and maintained pressure on gold.
However, gold's decline was offset by the US-Iran ceasefire agreement, which pushed oil prices down and eased some concerns about energy inflation. Brent fell to its lowest level since March 2, while WTI hit its lowest level since March 4. The market's next focus will be on the direction of the US dollar, Treasury yields, the likelihood of a Fed rate hike, and the implementation of the US-Iran agreement.
Source: newsmaker.id
