Gold prices dropped to their lowest level in five years on Thursday as the US dollar gained ground. The strong dollar was fueled by expectations of further interest rate hikes from the Federal Reserve to tackle high inflation.
On Thursday, December gold futures slid 0.3% to settle at $1,922 per ounce on the COMEX. Spot gold also edged down 0.1% to $1,893.66 per ounce.
The US dollar index, which tracks the greenback against a basket of currencies, climbed to 103.49, supported by bets that the Fed will continue raising rates aggressively. In November, the central bank implemented a fourth consecutive 75 basis point rate hike, lifting rates to a new range of 4.25-4.5%.
Fed minutes from the November meeting indicated policymakers intend to keep raising rates further. This is likely to buoy the dollar in the near term. Rising US Treasury yields also diminished appeal for non-yielding gold. Benchmark 10-year yields touched a 10-month high.
The strong dollar and expectations of ongoing rate hikes have weighed heavily on gold prices this year, driving the metal to its lowest price since early 2017. Analysts say gold will struggle to rebound until signs emerge that inflation is easing and the Fed may start cutting rates again.
