Gold nears one-year low as interest rate hike looms

Gold prices fell on Thursday to their lowest levels in nearly a year, as prospects for an interest rate hike by major central banks to curb spiralling inflation weighed on the precious metal’s allure.

Although gold is considered a hedge against inflation, higher interest rates increase the opportunity cost of holding the yellow metal, which does not yield a return.

And gold fell in immediate transactions by 0.3 percent to $ 1691.84 an ounce (an ounce) by 0313 GMT, after falling to its lowest level since early August 2021, recording $ 1689.40 earlier in the session.

US gold futures fell 0.6 percent to $1,690.40 an ounce.

The European Central Bank is set to raise interest rates for the first time in 11 years on Thursday, with a larger-than-said move increasingly likely as policymakers fear losing control of unbridled consumer price growth.

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

In Britain, inflation rose to a 40-year high in June, boosting the chances of the Bank of England raising interest rates by half a percentage point next month.

The dollar’s decline limited gold’s losses, as it fell 0.3 percent against rival currencies. A weak dollar makes gold cheaper for holders of other currencies.

Market participants are also anticipating the resumption of gas flows through the largest pipeline from Russia to Germany.

Among other precious metals, spot silver fell 0.6 percent to $ 18.54 an ounce, platinum fell 0.5 percent to $ 854.03, while palladium increased 0.3 percent to $ 1867.20.