Gold Reaches a One-Year low

Gold Reaches a One-Year low

Due to the rise in the US dollar index and prospects of more aggressive interest rate hikes, gold reaches a one-year low on Thursday.  

The price of Spot gold fell about 0.2% to $1,693.90 per ounce by 0052 GMT. While in August 2021 the price was trading at $1691.40 per ounce.

The dollar stayed below two-decade highs against its rivals, making greenback-priced bullion more expensive for buyers holding other currencies.

This is the first time in 11 years that when European Central Bank will increase the interest rate on Thursday with a bigger move. This move is expected as policymakers fear losing control of consumer price growth.

It is also expected that the U.S. Federal Reserve will raise interest rates by 75 basis points at its policy meeting next week in July.

Inflation in Europe reached a 40-year peak, indicating chances of a 50 basis points increase in the Bank of England rate hike next month.

Normally gold stands as a hedge against inflation but rising interest rates increase the opportunity cost of holding bullion, which pays no interest.

The world’s largest gold-backed exchange-traded fund-SPDR Gold Trust said its holding fell to 1,005.87 tons on Wednesday from 1,009.06 tons on Tuesday.

The meeting of European Union diplomats in Brussels on Wednesday agreed to a new round of sanctions against Russia for invading Ukraine, including a ban on importing gold from Russia as well.

Gold reaches a one-year low.