Gold falls to four-week low amid rate hike jitters, robust dollar

Gold prices slipped to their lowest in four weeks on Monday as prospects of aggressive policy tightening by the U.S. Federal Reserve and a stronger dollar dented the precious metal's appeal.

Spot gold fell 0.7% to $1,916.17 per ounce by 0922 GMT, earlier hitting its lowest since March 29 at $1,911.80. U.S. gold futures were 0.9% lower at $1,917.60.

"It seems that the fears about rate hikes have gotten the upper hand as of late," said Julius Baer analyst Carsten Menke.

With expectations for a half-percentage point interest rate hike at the Fed's May meeting now locked in, traders on Friday piled into bets that the U.S. central bank will go even bigger in subsequent months in order to tame soaring inflation.

Gold is highly sensitive to rising U.S. interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. It is, however, seen as a safe store of value during economic and political crises.

"We have a three-month target of $1,850," Menke said adding, "we have been of the opinion that gold is rather expensive as a safe haven asset."

"We would think that the inflationary pressures are about to ease and that should take away some of the safe haven demand we've seen for gold."

Rival safe haven, the dollar climbed to a level last seen in March 2020, making the greenback-priced gold costlier for other currency holders.
 

Silver fell 2% to $23.65 per ounce after hitting an over two-month trough.

The behemoths of the Fed's actions and the reduced growth outlook for China as it continues to be plagued by lockdowns, is outweighing silver's medium-term attractions, Rupert Rowling, market analyst at Kinesis Money, said in a note.

Palladium slid 2.8% to $2,309.26 per ounce, while platinum was down 1% at $920.98, its lowest since mid-December last year.

(Reporting by Eileen Soreng in Bengaluru; Editing by Shailesh Kuber)