Gold Hits Over 3-Week Low as U.S. Yield Spike Rattles Markets

By Ambar Warrick

Investing.com-- Gold prices fell to an over three-week low on Thursday as expectations of more Federal Reserve interest rate hikes pushed up U.S. Treasury yields and caused a steep selloff in metal markets.

U.S. Treasury yields are currently at their highest level since the 2008 financial crisis as the prospect of more interest rate hikes saw investors dumping bonds. This also boosted the dollar, which appeared set to reverse most of its recent losses.

A strong outlook for the dollar pressured bullion prices, while rising interest rates drove up the opportunity cost of holding gold - a trend that has weighed heavily on prices this year.

Spot gold fell 0.1% on Thursday to $1,627.80 an ounce, while gold futures fell 0.1% to $1,632.40 an ounce by 19:27 ET (23:27 GMT). Both instruments tumbled more than 1% on Wednesday, and were trading at their weakest level since late-September.

Gold is now about $10 away from revisiting its lowest level for the year, a level it could reach soon if pressure from the dollar persists. Bullion prices hit an over two-year low in September, following a sharp rate hike and more hawkish signals from the Fed.

Hawkish comments from Fed officials rattled markets this week. Minneapolis Fed President Neel Kashkari warned that overheated inflation could spur the Fed into raising its benchmark interest rate above 4.75% - its highest level since 2007.

His comments also came just a few days after data showed that U.S. inflation remained stubbornly near 40-year highs in September, despite a series of rate hikes by the central bank.

The dollar surged 0.8% on Wednesday, while 10-year Treasury yields jumped nearly 4%. Markets are now pricing in a nearly 100% chance that the Fed will raise rates by 75 basis points for a fourth consecutive meeting in November.

Other precious metals also logged steep losses. Platinum slumped over 3%, while silver lost 1.1%.

Among industrial metals, copper prices fell to an over three-week low even amid signs that supply will tighten in the near-term. Middling production reports from major miners BHP Group Ltd (ASX:BHP) and Rio Tinto Ltd (ASX:RIO) also fed the metal’s losses this week, as both miners warned of demand headwinds.

Copper futures fell 0.2% to $3.3180 a pound on Tuesday, after tumbling over 2% in the past three sessions.

Weakening economic activity across the globe weighed heavily on copper prices this year, even as slowing production and Russian sanctions pinched supplies.