Karachi: Gold price slid after surprise announcement from OPEC+ about cut to oil output sparked inflation concerns and raised bets of an interest rate hike at US Federal Reserve’s upcoming May meeting. Spot gold was down 0.6 percent at $ 1,956.89 per ounce, its lowest in nearly week. US gold futures shed 0.7 percent to $ 1,971.30.

Opportunity cost of holding non-yielding bullion rises when interest rates are increased to lower inflation. Gold has fallen “As investors weigh up lure of gold as safe-haven asset, versus potential for higher-for-longer interest rates. Clearly, fears of inflation and higher interest rates has won argument,” said Matt Simpson, senior market analyst at City Index.

“Gold is now vulnerable to move down to $ 1,900, given potential for higher terminal Fed rate that markets are currently pricing in,” Simpson added.

Markets now see 60.9 percent chance of Fed hiking rates by quarter point in May which, in turn has lifted US dollar and Treasury yields. ANZ, in note, observed gold’s “Ssafe-haven demand easing as US banking turmoil eased.”

Published in The Daily National Courier, April, 04 2023

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