Gold tumbles below $4,000 over worries of Fed rate hikes
What happened: Gold futures (GC=F) tumbled more than 3% on Wednesday, trading below $4,000 per troy ounce.
What’s behind the move: The precious metal declined as the US dollar (DX-Y.NYB) rose and investors awaited a key inflation report due on Thursday — the Personal Consumption Expenditures (PCE) index, which is the Federal Reserve’s preferred gauge of inflation.
The report comes after Fed Chairman Kevin Warsh reiterated last week that the central bank remains focused on bringing inflation down, remarks that the market interpreted as hawkish.
“The combination of higher bond yields, a firmer dollar, and expectations that policy rates may remain elevated for longer continues to challenge investor appetite for non-yielding assets,” Ole Hansen, Saxo Bank’s head of commodity strategy, wrote on Wednesday.
From a technical standpoint, the $4,000 to $4,100 range “remains critical,” Hansen said.
“A sustained break below that zone risks triggering a fresh wave of capitulation and momentum-driven selling following the sharp correction already seen from this year’s record highs.”
What else you need to know: Precious metals have underperformed broader markets since the Iran war began in late February, with gold prices falling roughly 24%.
The sell-off has accelerated as inflation readings have come in hot, driven by elevated oil prices.
Investors worry that even as crude prices have retreated, sticky inflation and a resilient labor market could prompt the Fed to keep interest rates unchanged for longer or even raise them before the year ends.
Year to date, bullion is down more than 7% after reaching a record high in late January.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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