Gold fell to the lowest in more than two years early on Monday as the US dollar continued to be the safe haven of choice amid recession worries sparked by rising interest rates, while bond yield rise to the highest in more than a decade.
Gold for December delivery was last seen down US$2.20 to US$1,653.40 per ounce, the lowest since March, 2020.
The drop comes as the dollar continues to appreciate following the Federal Reserve's 75 basis point hike to interest rates and the promise of further increases as the central bank looks to quell inflation. The ICE dollar index was last seen up 0.11 points to 113.33 after earlier touching 114.53, the highest since 2002.
"As long the dollar continues its relentless rise and until the market reaches peak hawkishness and yields start to top out, gold will struggle to act as a defense against stagflation," Saxo Bank noted on its website.
The rate hikes are also pushing up bond yields, bearish for gold since it offers no interest. The yield on the US 10-year note was last seen up 6.2 basis points to 3.75%, near the highest since 2008.
Comments