Gold Inches Lower On Rate Hike Worries

Gold prices inched lower on Thursday, as the dollar strengthened, and bond yields rose on fears that U.S. interest rates could stay higher for longer.

Spot gold slipped 0.3 percent to $1,831.17 per ounce, while U.S. gold futures were down half a percent at $1,836.55.

The dollar held firm today after a gauge of U.S. manufacturing contracted for a fourth straight month in February, but the prices-paid measure hit its highest level since September, keeping pressure on the U.S. central bank to raise rates further in coming months.

The U.S. central bank needs to lift the federal funds rate to between 5 percent and 5.25 percent and keep there “well into 2024” in order to bring inflation under control, Atlanta Fed President Raphael Bostic said on Wednesday.

Separately, Minneapolis Fed President Neel Kashkari also called for higher rates, adding he is “open-minded” on either a 25- basis point or a 50-basis point rate hike at the U.S. central bank’s next meeting in March.

Fed funds futures show that markets expect a peak policy rate of 5.5 percent in September.

Meanwhile, data released a while before showed that Eurozone inflation eased less than expected in February.

ECB’s Joachim Nagel said Wednesday that the central bank might need large interest-rate increases beyond March to combat high inflation.

ECB President Christine Lagarde told Spanish television show Espejo Publico that interest-rate increases may need to continue beyond a planned half-point move in two weeks’ time.

Elsewhere, Bank of England Governor Andrew Bailey said in his speech at Brunswick Group’s Cost of Living Conference in London that rates could rise further if inflationary pressures become embedded.

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