Gold prices fell sharply on Wednesday as the US dollar strengthened following the release of the US consumer price index report on Tuesday, which showed inflation falling only slowly, implying the Federal Reserve will need to raise borrowing costs further.
Price movement
On Comex, gold futures for April GC00, -1.04% GCJ23, -1.04% fell $20, or 1%, to $1,846 per ounce.
March silver futures SI00, -1.57% SIH23, -1.57% fell 34 cents, or 1.6%, to $21.53 an ounce.
Palladium for March PAH23, -1.86% delivery fell by $15.20, or 1%, to $1,451 per ounce, while platinum fell by $11, or 1.2%, to $928 per ounce.
Copper for March HGH23, -1.69% fell 6 cents, or 1.5%, to $4.015 per pound.
Market forces
Following the release of Tuesday’s US CPI data, the US dollar advanced as the numbers were generally hotter than expected, prompting traders to position for the possibility that the Federal Reserve will raise its policy interest rate above 5%.
“While inflation in the United States is clearly on the decline, Tuesday’s figure showed that the rate at which consumer prices are rising hasn’t slowed as much as the market expected,” said Rupert Rowling, a market analyst at Kinesis Money.
“This recalculation of how many more rate hikes the Fed intends to implement has caused the price of gold to fall as the prospect of rising interest rates reduces the appeal of the precious metal, as it does not generate a yield for its holders, with other interest-bearing assets favored instead.”
The ICE U.S. Dollar Index, which measures the strength of the dollar against a basket of rival currencies, increased 0.5% to 103.71. Investors are now anticipating the release of January retail sales data in the United States.
