Gold loses for second year due to raising interest rates ‎pressures

Gold prices flat today, Friday, but are heading to incur a loss for the second year in a row, as the Federal Reserve’s (US Central Bank) hike in interest rates severely weakened the attractiveness of non-return bullion.

According to Reuters, gold rose in the spot market by 0.2 percent to $1818.19 an ounce at 0540 GMT. US gold futures fell 0.1 percent to $1,824.30.

“For most of the year, gold has been pressured by the Federal Reserve’s tightening of monetary policy,” said Ilya Spivak, director of global macroeconomic research at TestLife. But by the end of the year, it witnessed some recovery and got a lifeline due to expectations that the council may slow the pace of raising interest rates.

Gold is heading for an annual decline of 0.5 percent, as the dollar was the preferred safe haven amid huge interest rate increases. The dollar index achieved its best annual performance since 2015, which made gold too expensive for holders of other currencies.

However, gold prices rose by nearly $ 200 from their lowest level in more than two years, recorded in September, and are on their way to achieving the best quarterly performance since June 2020, in hopes that the US central bank will slow the pace of raising interest rates. ,

The bank raised interest rates by 50 basis points in December after four consecutive increases of 75 basis points each time.

High interest rates increase the opportunity cost of holding non-returnable gold

“In 2023, gold prices will see a lot of volatility, but they won’t move much further than that because they will be stuck between a strong dollar and lower Treasury yields,” Spivak said.

“If industrial demand stagnates in 2023, platinum and palladium are likely to suffer,” he added.

As for other precious metals, the price of silver in the spot market rose 0.5 percent to 23.99 dollars, platinum increased 0.9 percent to 1063.63 dollars, while palladium fell 0.4 percent to 1807.53 dollars.

Silver and platinum are heading towards an annual rise, while palladium is heading to incur an annual loss of more than four percent.