Gold extended a decline, a day after a resurgent US dollar and the prospect of higher interest rates pushed the metal below $4,000 an ounce for the first time since November.
Bullion fell as much as 0.9% to near $3,964, having given up almost 3% in the previous session. A gauge of the US dollar has gained 0.8% this week, making precious metals priced in the greenback more expensive for buyers in other currencies. Silver also retreated after a drop of nearly 7% on Wednesday took it below $60 an ounce for the first time since December.
Adding pressure to gold, Federal Reserve policymakers have signaled growing support for higher borrowing costs, with new chair Kevin Warsh adopting a hawkish tone at his first rate-setting meeting last week. Tighter monetary policy makes bullion less attractive relative to yield-bearing assets like Treasuries.
“Gold is facing a more difficult mix of hawkish Fed repricing, firmer real yields and some technical damage after breaking below the psychological $4,000 level,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. “That keeps rallies vulnerable to fading for now.”
The recent decline has brought an end to a long-running bull run for gold. The metal has posted double-digit gains for each of the last three years, more than doubling in value as central banks, money managers and retail investors piled into the trade.
That rally ran out of steam in late January, shortly after the precious metal hit an all-time high near $5,600 an ounce. By June, it had fallen more than 20% below its last peak, the threshold that conventionally marks the start of a bear market. Chief among the factors that weighed on bullion’s performance was the outbreak of the US-Iran war, which raised energy prices and stoked inflation.
Another major driver for gold’s earlier bull run — the so-called debasement trade, whereby traders prefer assets like gold and Bitcoin over currencies vulnerable to fiscal excess — has also been losing momentum. Massive investment tied to artificial intelligence and the US’s relatively favorable energy position have strengthened the dollar’s appeal compared with energy-importing economies in Europe and Asia.
The “cyclical US exceptionalism theme is overriding the structural debasement theme,” Nicky Shiels, head of metals strategy at trader and refiner MKS PAMP SA, said in a note.
As gold has fallen, several major banks have cut their price forecasts in the last week. Though revised targets imply prices will gain from current levels, Wall Street analysts are markedly less bullish than before. Goldman Sachs Group Inc. axed $500 from a forecast that now sees bullion ending the year at $4,900 an ounce, while Deutsche Bank AG cut its fourth-quarter estimate by 17%.
Spot gold fell 0.5% to $3 980.63 an ounce at 10:50 a.m. in Singapore. Silver declined 1.3% to $56.66 an ounce. Platinum also dropped, while palladium was little changed. The Bloomberg Dollar Spot Index was marginally lower.