Gold futures tumbled on Thursday as the U.S. dollar and Treasury yields advanced after the Federal Reserve delivered its fourth 75 basis point interest rate hike since the start of the year, pushing prices for the precious metal to their lowest finish in more than two and a half years.
Price action
-
Gold prices for December delivery
GCZ22,
-0.95%
fell $19.10, or 1.2%, to settle at $1,630.90 per ounce on Comex after trading as low as $1,618.30. Prices for the most-active contract haven’t traded or settled at levels this low since April 2020, according to Dow Jones Market Data. -
Silver prices for December
SIZ22,
-0.25%
delivery were off 16 cents, or 0.8%, at $19.43 per ounce. -
Palladium for December
PAZ22,
-2.25%
declined by $52, or 2.8%, at $1,798.10 per ounce, while platinum for January
PLF23,
-2.80%
was down $26.80, or 2.8%, to $924.10 per ounce. -
December copper
HGZ22,
-1.10%
lost 4 cents, or 1.2%, to $3.427 per pound.
What’s happening
“The Fed aftermath is leading to pain for bullion as Fed Chair Powell has signaled rates will be much higher,” said Edward Moya, senior market analyst at OANDA, in a market update. “The peak in the dollar was potentially going to be put in place, but…Powell said they are worried more about doing too little on inflation than too much.”
The central bank on Wednesday raised its benchmark interest rate by 0.75 percentage points to a range of 3.75% to 4% — the highest level in 15 years.
Powell acknowledged in his post-meeting press conference that at some point “it will be appropriate to slow the pace of increases,” but he also said the Fed’s benchmark rate was likely to end up “higher than previously expected.”
Read: Fed says it may hike interest rates at slower pace, but destination is now 5% or higher
“Gold and silver turned sharply lower yesterday after Fed Chair Powell delivered a hammer-blow to sentiment across markets as he managed to both pull off the idea of the Fed may indeed soon pivot to a slower pace of rate hikes, but that any talk of a pause is very premature,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Treasury yields climbed, with the 10-year yield
TMUBMUSD10Y,
up 7.4 basis points to 4.128%. The ICE U.S. Dollar Index
DXY,
a gauge of the dollar’s strength against a basket of rivals, was up 1.4% at 112.90.
“Gold could be in trouble here as the dollar could outperform for the next month.,” said Moya. “Gold is hovering right around key support which means if prices break, momentum selling could be intense.”