The rise of the dollar accelerates the fall of the metals

A customer checks a gold necklace before buying it at a jewelry showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Kolkata, India, May 3, 2022. REUTERS/Rupak of Chowdhuri

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May 12 (Reuters) – Gold and other precious metals fell on Thursday, with palladium shedding more than 8% as investors flocked to the dollar driven by bets that the U.S. Federal Reserve will stick to increases aggressive rates.

Spot gold fell 1.6% to $1,823.14 an ounce at 1:51 p.m. EDT (1751 GMT). US gold futures fell 1.6% to $1,824.60.

“The dollar is rallying as things look potentially negative in the US, hurting gold. Additionally, the market realizes the likelihood of seeing fairly aggressive interest rate increases,” said Bart Melek, head of commodity strategies at TD Securities.

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The rival safe-haven dollar has hit new 20-year highs, making gold less attractive to other currency holders amid fears that tighter monetary policies to tame soaring inflation could hurt the economy. ‘Mondial economy. Read more

Although considered a hedge against inflation and a safe bet in times of economic and political turmoil, gold is highly sensitive to rising US interest rates, increasing the opportunity cost of holding non-performing bullion.

“However, gold is holding up relatively better compared to industrial precious metals,” the demand for which could be affected in a recessionary environment, Melek added.

Gold’s declines, however, were capped by a drop in benchmark 10-year Treasury yields, which hit a two-week low.

Spot silver fell 4.3% to $20.63 an ounce – it hit its lowest level since July 2020 earlier in the session.

“Silver is falling faster than gold, this is a bearish sign for the whole complex. With the ongoing lockdowns in China, industrial metals are struggling and the US institutional investor bailing out an ETF on gold by extension also bails out silver,” says independent analyst Ross Norman.

Palladium slid 7% to $1,892.69, having previously slipped as much as 8.2% to hit its lowest level since January at 1,867.68.

Platinum fell 5.2% to $940.51.

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Reporting by Ashitha Shivaprasad and Eileen Soreng in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber

Our standards: The Thomson Reuters Trust Principles.

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