Higher interest rates raise the returns on yield-bearing assets. However, gold, which do not pay a yield, become less attractive as a safe-haven play.
Moreover, a strengthening U.S. dollar has also kept pressure on gold prices, with the greenback continuing to gain momentum Thursday after reaching a 14-year high in response to the Fed’s decision. Precious metals are priced in USD and become more expensive to foreign buyers in the event of an appreciating dollar.
“As long as the dollar stays firm then this will be the way of the world for the time being,” David Govett, head of precious metals at brokerage Marex Spectron, said in a note.
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