Gold prices held steady on Thursday, while a firmer dollar and fading hopes for near-term interest rate cuts due to higher oil prices continued to weigh.
Hans-peter Merten | The Image Bank | Getty Images
Gold and silver tumbled on Tuesday, as a global sell-off in tech stocks stoked by fears of higher interest rates spilled over into metals.
Gold futures fell 1.3% to settle at $4,149.40 an ounce, while silver futures tumbled over 5% to end the day at $62.07 an ounce.
Since the outbreak of the U.S.-Iran war on Feb. 28, gold’s reputation as a safe-haven asset in times of turmoil has come under pressure as some of the drivers behind its ascendance have been called into question.
An unexpectedly hawkish Fed meeting chaired by Kevin Warsh last week boosted expectations for a year-end interest rate hike, further pressuring gold prices, as the prospect of higher interest rates tend to weigh on the non-yielding precious metal.
Meanwhile, Wall Street is also changing its tune on gold, after several banks downgraded their price forecasts on the metal following Warsh’s first meeting.
Bank of America’s previous $6,000 target for an ounce of gold looks unlikely now, because the inflation backdrop remains “uncomfortable,” likely driving tighter monetary policy, its commodity strategist Michael Widmer wrote on Friday.
Deutsche Bank wrote in a note published Tuesday that “hawks are driving out bulls” in the gold market, revising its price target to $4,300 an ounce in Q3 if the Fed stays on hold, while outlining the risk that three to four Fed hikes could take gold as low as $3,800 an ounce.
