By Eileen Soreng
(Reuters) – Gold prices were set for a fifth consecutive monthly decline on Wednesday as strong U.S. data and hawkish comments from the Federal Reserve pointing to further interest rate hikes hurt the lure of non-productive metal.
Spot gold was flat at $1,724.18 an ounce as of 0541 GMT, trading near a one-month low reached on Monday. Bullion has lost 2.3% so far in August.
US gold futures fell 0.1% to $1,735.40.
“The Fed has no intention of easing significantly in the short term. They are focused on inflation and what they want to do is maybe even create risks in both directions around political expectations where it gives somewhat less explicit forward guidance,” said Ilya Spivak, currency strategist at DailyFX.
This contributes to the weakness in gold and the strength of the US dollar, Spivak added.
The influential head of the New York Fed said on Tuesday that the US central bank will likely have to raise its key rate “a little above” 3.5% and keep it there until the end of 2023.
Even though gold is considered an inflation hedge, rate hikes increase the opportunity cost of holding bullion while boosting the dollar.
The latest data showing U.S. job openings rose in July and a stronger-than-expected rebound in consumer confidence in August bolstered expectations that the Fed will maintain aggressive policy.
The dollar index plunged 0.2% but was not far off a two-decade high hit on Monday. [USD/]
A number of European Central Bank policymakers have also called for rapid rate hikes ahead of next week’s policy meeting.
Indicating investor sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.4% to 976.26 tonnes on Tuesday.
Spot silver fell 0.1% to $18.48 an ounce and was down 9% in August, its biggest decline since September 2020.
Platinum rose 0.9% to $855.50, but was heading for a nearly 5% decline for the month. Palladium climbed 1.9% to $2,128.08 an ounce.
(Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)
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