Gold price falls to six-week low as dollar rallies on sour sentiment

Bullion fell for a fifth day on Thursday, deepening its slump as a gauge of the dollar’s strength rallied to a record high and Treasury yields climbed following encouraging data on US manufacturing growth and jobless claims.

The reports add support for larger interest-rate hikes by the US Federal Reserve, dampening the appeal for non-interest bearing gold. The Bloomberg Dollar Spot Index climbed as much as 0.9%.

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 and its fight to combat 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,” he said.

Spot gold declined 0.8% to $1,697.52 an ounce as of 5 p.m. in New York. The Bloomberg Dollar Spot Index rose 0.7%. Spot silver fell 1% to the lowest since June 2020, while platinum and palladium also declined. Gold futures fell 1% to settle at $1,709.30 an ounce on the Comex in New York.

Base metals
Base metals also slumped, with copper falling further after capping its fifth consecutive monthly loss — the longest downward streak since the 2008 financial crisis — after China’s Covid-19 lockdown of megacity Chengdu added to demand woes.

A wave of risk aversion hit markets Thursday, dragging copper down to near a one-month low. The Chinese metropolis of Chengdu will lock down its 21 million residents to contain a Covid-19 outbreak. The capital of Sichuan will be the biggest city to be shut down since Shanghai’s bruising two-month lockdown earlier this year.

Copper on the LME fell 2.6% to settle at $7,597 a metric ton as of 5:51 p.m. local time, adding to a 4.4% slide over the previous two trading sessions. Aluminum declined 2.7% to the lowest level since April 2021, while tin slumped 7.6%. Zinc had its third straight decline on concerns about lower demand for the metal mostly used to galvanize steel, dropping 5.8%.