Gold hits near one-year low on dollar strength, imminent rate hikes

Gold prices fell on Thursday to their lowest in nearly a year, as an elevated U.S. dollar and prospects of more interest rate hikes by major central banks to combat soaring inflation weighed on bullion’s appeal.

Spot gold was down 0.2% at $1,693.90 per ounce by 0052 GMT, after falling to its lowest since early August 2021 at $1,691.40 in early Asian trade.

U.S. gold futures fell 0.5% to $1,692.10 per ounce.

The dollar held below two-decade highs against its rivals, making greenback-priced bullion more expensive for buyers holding other currencies.

The European Central Bank will raise interest rates for the first time in 11 years on Thursday with a bigger-than-flagged move seen as increasingly likely as policymakers fear losing control of runaway consumer price growth.

The U.S. Federal Reserve is widely expected to raise interest rates by 75 basis points at its policy meeting next week.

British inflation in June surged to a 40-year peak, bolstering chances of a half-percentage-point Bank of England rate hike next month.

Although gold is seen as a hedge against inflation, rising interest rates increase the opportunity cost of holding bullion, which pays no interest.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.3% to 1,005.87 tons on Wednesday from 1,009.06 tons on Tuesday.

European Union diplomats meeting in Brussels on Wednesday agreed a new round of sanctions against Moscow for invading Ukraine, including a ban on importing gold from Russia.

Spot silver was flat at $18.66 per ounce, platinum eased 0.2% to $856.12, and palladium rose 0.2% to $1,864.83.