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Commodity Market: Gold hits an eight-week low, pressured by out-sized interest rate risk, strong US Dollar

Spot Gold extended recent string of losses and registered a fresh eight-week low on Thursday, as the US Dollar attempted to re-visit multi-decade highs driven by expectations of super-sized interest rate hikes by the Federal Reserve.

“The Fed needs to shock the economic system hard and the chance of a 100-basis-point rate rise is a very real possibility,” Michael Langford, director at corporate advisory firm AirGuide, was quoted as saying by Reuters.

“A 100-basis-point rate rise will see gold break below $1,680/oz,” he added.

Markets have priced a 37% chance of a 100 basis point Fed rate hike next week.

A rise in near-term interest rates tends to increase the opportunity cost of holding Gold, which pays no interest.

Yesterday International Monetary Fund chief Kristalina Georgieva said that central banks should be persistent in their struggle with broad-based inflation.

As of 8:44 GMT on Thursday Spot Gold was retreating 0.56% to trade at $1,688.02 per troy ounce. Earlier today the yellow metal slipped as low as $1,685.71 per troy ounce, which has been its weakest price level since July 21st ($1,680.93 per troy ounce).

The commodity is likely to find near-term support in the $1,670-$1,685 area, formed by the lows from May 2020, March 2021, August 2021 and July 2022.

Gold futures for delivery in December were losing 0.67% on the day to trade at $1,697.65 per troy ounce, while Silver futures for delivery in December were retreating 0.65% to trade at $19.442 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.03% to 109.610 on Thursday. Last week, the DXY climbed as high as 110.786, which has been its strongest level since June 2002.

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