Gold slips to over one-week low on hawkish Fed, US data

Gold fell to more than a week’s low on Thursday, extending its decline for a third straight session, as investors grew apprehensive over US rate cut timings and on strength in US business activity.

Spot gold fell 1.8% to USD 2,336.39 per ounce, its lowest since May 13, as of 1748 GMT. US gold futures settled 2.3% lower to USD 2,337.20 per ounce.

The non-yielding bullion hit a record high of USD 2,449.89 on Monday and is up 14% so far this year.

Making gold less attractive, the dollar cut its losses for the day on US business activity accelerating to the highest level in over two years in May, suggesting that economic growth picked up halfway through the second quarter.

Advancing dollar and a weakening US rate cut outlook have catalyzed a round of profit-taking in gold, but the downside will be limited, said Daniel Ghali, commodity strategist at TD Securities.

While the policy response for now would “involve maintaining” interest rates at current levels, the latest Fed minutes reflected discussions of possible hikes.

“Investors that care about the Fed outlook actually aren’t all that long in gold. They’ve missed the rally and in turn, don’t have that much gold to sell. So while we do think the gold prices are staging a correction here, but that will be relatively shallow,” Ghali said.

UBS raised its gold price forecasts to USD 2,600/oz for 2024-end and recommended buying on dips at around USD 2,300/oz or below, citing a series of softer US data for April, an upwardly revised central bank demand for gold and ongoing geopolitical uncertainties.

Meanwhile, imports to India, the world’s second-biggest gold consumer, could fall by nearly a fifth in 2024 as high prices spur retail consumers to exchange old jewelry for new items, according to an industry body.

Spot silver fell 1.8% to USD 30.22. The recent rally in gold and copper prices drove it to USD 32.5, an 11-year high, earlier this week.

Platinum was down 1.4% at USD 1,020.35, while palladium lost 3.5% to USD 964.75.

(Reporting by Harshit Verma and Rahul Paswan in Bengaluru; Editing by Shilpi Majumdar and Alan Barona)