Dollar Rally Accelerates Decline in Metals, According to Reuters

By Ashitha Shivaprasad

Gold and other precious metals experienced a significant decline on Thursday, with palladium plummeting more than 8%. Investors shifted their focus to the dollar, spurred by expectations that the U.S. Federal Reserve will continue its aggressive interest rate hikes.

As of 01:51 p.m. EDT, gold had fallen 1.6% to $1,823.14 per ounce, while U.S. futures also dropped 1.6% to settle at $1,824.60.

"The dollar is rallying as economic conditions in the U.S. appear to be worsening, which is negatively impacting gold. Additionally, the market is beginning to recognize the probability of significant interest rate increases," remarked Bart Melek, head of commodity strategies at TD Securities.

The competing safe-haven dollar surged to 20-year highs, diminishing gold’s appeal to holders of other currencies. This shift is largely influenced by fears that stricter monetary policies aimed at controlling soaring inflation could adversely affect the global economy.

Although gold serves as a hedge against inflation and a secure asset during economic and political uncertainty, it remains highly sensitive to rising U.S. interest rates, which elevate the opportunity cost of holding non-yielding metal.

"Nevertheless, gold is performing relatively better than industrial precious metals, the demand for which is likely to decline in a recession," Melek added.

The drop in gold prices was somewhat offset by a decrease in the benchmark 10-year Treasury yields, which fell to their lowest level in two weeks.

Spot silver saw a sharper decline of 4.3%, reaching $20.63 per ounce, marking its lowest point since July 2020 earlier in the session.

"Silver is decreasing more rapidly than gold, signaling a bearish trend for the entire sector. With ongoing lockdowns in China, industrial metals are facing challenges, and U.S. institutional investors withdrawing from a gold ETF are likely to reduce their exposure to silver as well," noted independent analyst Ross Norman.

Palladium fell 7% to $1,892.69, having earlier hit its lowest level since January, with a drop of 8.2% to $1,867.68. Platinum also declined, decreasing by 5.2% to $940.51.