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Gold’s reversal comes days after rallying to within just $5 of a record high, as Russia’s invasion of Ukraine caused commodities to surge, threatening a combination of low growth and high inflation. Prices of key products including oil have cooled since then, easing those concerns.
Bullion has risen this year in part because of its appeal as a hedge against higher consumer prices. Months of speculation about a new wave of rate hikes look to be coming to a head on Wednesday, when the US central bank is expected to begin tightening in order to rein in inflation.
A report Tuesday showed prices paid to US producers rose strongly in February on higher costs of goods, underscoring inflationary pressures that set the stage for a Fed rate increase this week.
“Gold prices have moved lower in the past three days mainly because the oil prices have fallen,” which brings some good news that inflation may ease off a little, Naeem Aslam, chief market analyst at Ava Trade, said in a Bloomberg note.
“The first rate hike move from the US quite often signals a low point in gold, so we’ll see what kind of signal they send tomorrow, and how hawkish their statement is, which will probably determine the short-term outlook from here,” Saxo Bank analyst Ole Hansen told Reuters.
(With files from Bloomberg and Reuters)
