Gold Falls to Six-Week Low as Dollar Rallies on Sour Sentiment

(Bloomberg) — Gold fell to a six-week low as the dollar strengthened amid growing angst over global economic growth.

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European stocks and US futures declined on Thursday, coming under pressure from the increasingly tight outlook for monetary policy and a lockdown in China. The greenback gained as investors sought a haven, causing non-interest bearing gold to slide for a fifth day.

The metal fell for a fifth straight month in August on expectations the Federal Reserve will keep interest rates high to cool inflation. Cleveland Fed President Loretta Mester said Wednesday the US central bank needs to raise its benchmark rate above 4% by early 2023 and leave it there through year-end.

That’s the latest in a series of hawkish messages coming from US policy makers. Money markets are also pricing in 125 basis points of tightening by the European Central Bank by October as officials step up their fight to contain inflation.

The weakness in gold may continue unless there is a substantial correction in the dollar and bond yields, said Ravindra Rao, head of commodity research at Kotak Securities Ltd. “Also weighing on price are concerns about health of Chinese economy, which may hamper consumer demand.”

US jobless claims unexpectedly declined last week, while purchasing managers indexes are due later Thursday. The nonfarm payrolls report on Friday will provide an indication of how the labor market is holding up to higher interest rates, after a gauge Wednesday indicated it was cooling in a welcome sign for the Fed.

Spot gold declined 0.8% to $1,697.24 an ounce as of 2:19 p.m. in London. The Bloomberg Dollar Spot Index rose 0.4%. Silver fell as much as 2.4% to the lowest in two years, while platinum and palladium also declined.

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