Gold declined toward $4,000 an ounce and silver plunged as much as 5.8% as a broad selloff swept through financial markets.
Bullion prices dropped as much as 2.4% to about $4,091, nearing a low struck earlier this month, as technology stocks led global declines in equity markets. While gold is known as a haven investment, it often falls during big cross-market selloffs as investors trim holdings to cover losses elsewhere in their portfolios. Gold was last below $4,000 in November.
The tech slump has heaped further pressure on precious metals, which have been weighed down by concern that lingering inflation risks mean the Federal Reserve will need to hike interest rates. Higher borrowing costs create headwinds for gold by making yield-bearing assets like Treasuries more attractive. At the same time, the dollar’s recent rally has also driven gold lower.
Meanwhile, the hawkish tone adopted by new Fed Chair Kevin Warsh has jolted investors and offset the positive impact from an interim US-Iran peace deal signed last week. Since the central bank’s last meeting, a gauge of the dollar has gained 0.8%.
“Fed repricing, together with resilient US macro data, has played the primary role in pushing gold lower,” Deutsche Bank AG analyst Michael Hsueh said in a note. The bank cut its price forecast to $4,300 for the third quarter — down by more than a fifth from the prior outlook — and to $4,800 for the final three months of the year.
Deutsche Bank’s less optimistic outlook echoes a move last week by Goldman Sachs Group Inc., which chopped $500 off its year-end forecast to $4,900 as it now sees no rate cuts by the US central bank this year.
Gold is down more than 22% since the Iran war began at the end of February, while silver has fallen by a third. Traders will be monitoring the price index due Thursday for US personal consumption expenditures, which are expected to accelerate.
“The gold and silver markets remain in thrall to external factors,” Rhona O’Connell, head of market analysis for EMEA and Asia at StoneX Group Inc., wrote in a note. “The technical positions are not good for either metal, although some flows are improving.”
Spot gold fell 1.9% to $4,111.57 an ounce as of 4:13 p.m. in New York. Silver slid 5.3% to $61.63. Platinum and palladium also dropped, while the Bloomberg Dollar Spot Index rose 0.4%.
(By Yihui Xie and Mark Burton)
