- Gold fell below $4,000 an ounce for the first time since November due to a stronger dollar
- Prices dropped as the dollar index rose nearly 1% this week, making bullion costlier globally
- Silver also declined below $60 an ounce, falling over 50% from its January peak
Gold fell below $4,000 an ounce for the first time since November, as a resurgent dollar and the prospect of higher interest rates bring bullion's three-year bull market to a halt.
Prices slipped as much as 3.7% to trade below $3,970 an ounce, retreating for a second session. A gauge of the greenback has gained nearly 1% so far this week, making dollar-priced bullion more expensive for buyers in other currencies. Silver also fell below $60 an ounce for the first time since December, down more than 50% from its January peak.
Gold posted double-digit gains for each of the last three years, more than doubling in price as central banks, money managers and retail investors all piled into the trade.
That rally ran out of steam in late January, shortly after the precious metal hit an all-time-high near $5,600 an ounce. By June, it had fallen more than 20% below its last peak, the threshold that conventionally marks the start of a bear market.
Chief among the factors that weighed on bullion's performance was the outbreak of the US-Iran war. Higher energy prices have fueled inflation and increased the likelihood of rate hikes, making bullion less attractive relative to yield-bearing assets like Treasuries.
Although oil prices are now falling as the US and Iran negotiate a permanent peace deal, new Federal Reserve Chair Kevin Warsh surprised markets last week as he signaled that he'll take a tough stance on inflation at his first rate-setting meeting. That's heaped further pressure on gold, with prices down 8% over the past seven trading sessions.
"The primary driver behind gold's recent decline has been a significant repricing of interest-rate expectations," Ewa Manthey, commodities strategist at ING Groep NV wrote in a note Wednesday.
Warsh's hawkish messaging will likely limit concerns about central bank independence in developed economies, analysts at Goldman Sachs Group Inc said. Those concerns had previously fueled bets on precious metals as part of the "debasement trade" - broadly defined as a strategy favoring assets such as gold and Bitcoin over currencies vulnerable to inflationary, fiscal and monetary excess like the dollar depreciation.
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Several major banks have cut their gold forecasts in the last week. Though revised targets imply prices will gain from current levels, Wall Street analysts are markedly less bullish than before. Goldman Sachs axed $500 from a forecast that now sees bullion ending the year at $4,900 an ounce, while Deutsche Bank AG cut its fourth-quarter estimate by 17%.
Continued sales from gold-backed exchange-traded funds showed that the usual support for the metal is "notably absent," Deutsche Bank wrote in a note. Meanwhile in China, the metal's onshore discount to Comex prices in New York suggests imports will not be a support for the market, the bank's analysts said.
Still, one bright spot for bullion is the continued strength of central-bank demand. The monetary institutions added to their holdings at the fastest pace in more than a year in the first quarter, and survey data indicates they intend to buy more.
"The one pillar which remains strong is central bank demand, and we expect this to be the case for some time to come," Deutsche Bank wrote.
Spot gold traded at $3,970.10 an ounce at 2:24 p.m. London time, down 3.6%. Silver fell 5% to $58.52 an ounce. Platinum and palladium saw similar falls, while the Bloomberg Dollar Spot Index rose 0.4%, hitting the highest since November.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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