Gold dropped back toward an 11-month low as investors again turned to the dollar as a haven asset amid expectations for more aggressive US monetary tightening.
The metal slipped as much as 1.5% after ending Wednesday 0.6% higher in the wake of a searing inflation report from the US. Investors bet that the Fed is more likely than not to raise interest rates by 100 basis points when it meets later this month, a move that would boost the chances of the economy entering a recession.
By Thursday, investors had digested the inflation news and again turned away from gold to the greenback as a hedge, according to David Lennox, a resources analyst at Fat Prophets.
“We’d really need to see a much lower US dollar for gold to get a sustained positive kick going forward,” Lennox said. “Investors are turning more to the greenback than bullion as a haven asset.”
The Bloomberg Dollar Spot Index gained 0.8% to its highest level on record, eclipsing the peak from the Covid-19 pandemic.
