Gold hastens retreat on higher-for-longer rate bets

Sept 27 – Gold extended declines for the third straight session on Wednesday as appeal for non-yielding bullion took a hit from bets that the Federal Reserve may keep interest rates elevated, while traders hoped for more cues from US inflation numbers this week.

Spot gold dropped 1.4% to USD 1,874.34 per ounce by 1:47 p.m. EDT (1747 GMT), its lowest in over six months. US gold futures settled 1.5% lower at USD 1,890.90.

The prospects of higher-for-longer US rates sent investors scurrying to the safety of the dollar instead, making gold more expensive for overseas buyers.

Further hammering appetite for zero-yield gold, Treasury yields also remained near 16-year highs.

“As long as the narrative remains higher-for-longer, it’s going to continue pressuring precious metals, ” said Ryan McKay, commodity strategist at TD Securities.

“If the (inflation) data continues to come in stronger, that will be another thing that continues to weigh on gold.”

The US personal consumption expenditures (PCE) index, the Fed’s preferred inflation measure, is due on Friday.

However, “If the inflation number falls, we could see some support coming to gold and the expectation of tightening monetary policy could dampen a bit,” said ANZ analyst Soni Kumari.

A “soft landing” for the US economy is more likely than not, Minneapolis Fed President Neel Kashkari said on Tuesday, but there’s also a 40% chance that the Fed will need to raise rates “meaningfully” to beat inflation.

On the flip side, gold continued to find some support from robust physical demand, especially from central banks and in China, although “the near-term dynamics are certainly the Fed,” TD’s McKay said.

Silver was 1.7% lower at USD 22.47 per ounce, a two-week low. Platinum fell about 2.2% to USD 883.94 and palladium was down 0.3% at USD 1,219.48.

(Reporting by Arpan Varghese, Anjana Anil, Deep Vakil in Bengaluru; Editing by Maju Samuel)