Business Maverick: Gold Plunges to Lowest in Two Years Amid Fed Rate-Hike Bets

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Gold fell to the lowest since April 2020 amid expectations of more aggressive interest-rate hikes by the Federal Reserve despite a fresh round of mixed US data.

Applications for US unemployment insurance fell for a fifth straight week, suggesting demand for workers remains healthy despite an uncertain economic outlook. Retail sales unexpectedly rose in August, but the prior month’s number was revised sharply lower. Factory production rose slightly in August while total industrial production, including mining and utilities, fell.

The reports come on the heels of US consumer and producer price indexes earlier this week that showed inflationary pressure in the economy. The print prompted investors to fully price in a 75 basis point rate hike from the US central bank at its September meeting next week, while some are even predicting a full percentage point increase.

“Damage is being driven by the market pricing in a 1% rate hike next week and a terminal rate around 4.5%,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Stronger than expected retail sales are not helping,” given their potential influence on the Fed’s upcoming rate decision.Gold has slid almost 8.8% this year as the Fed aggressively raises rates, which diminishes the appeal of assets that bear no interest.

Spot gold fell 1.8% to $1,666.45 at 10:56 a.m. in New York, heading for a third session of declines. Earlier, it touched $1,666.35, the lowest since April 2020. The Bloomberg Dollar Spot Index was up 0.2%. Silver dropped, palladium fluctuated and platinum gained.

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