Gold's lustre dulls as dollar rates rebound, rate hike fears loom

By Ashitha Shivaprasad

(Reuters) - Gold prices fell on Wednesday as looming U.S. interest rate hike fears and a resurgent dollar dimmed the metal's shine.

Spot gold was down 0.1% at $1,812.94 per ounce by 10:12 a.m. EDT (1412 GMT), erasing small gains from earlier in the day that were potentially driven by growth risks tied to soaring inflation.

U.S. gold futures fell 0.5% to $1,809.50.

Federal Reserve Chair Jerome Powell on Tuesday pledged that the U.S. central bank would ratchet up interest rates as high as needed to kill a surge in inflation.

"Renewed dedication by the Fed to fight the inflationary pressures is nipping at the heels of the gold market," said David Meger, director of metals trading at High Ridge Futures.

 

"The real question and crux of the situation is if what Fed does is enough given the amount of inflation. If it isn't enough to quell the inflationary pressures, then gold will be supportive in that environment."

Gold is considered a hedge against inflation. However, rising U.S. interest rates dull interest in bullion, which yields no interest.

Meanwhile, rival safe-haven dollar rebounded after posting its biggest single-day drop in more than two months, which further hit appetite for gold among overseas buyers. [USD/]

Investors find Powell's latest comments not surprising but certainly hawkish, said Kitco senior analyst Jim Wycoff in a note.

Inflows into SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continued to decline, reflecting a bearish sentiment in the market. [GOL/ETF]

British inflation surged last month to its highest in 40-years, pressuring the Bank of England to keep raising interest rates despite a risk of recession.

Spot silver fell 0.6% to $21.49 per ounce, while platinum was down 1.2% to $939.94 and palladium fell 0.1% to $2,050.64.

(Reporting by Ashitha Shivaprasad and Swati Verma in Bengaluru; Editing by Shinjini Ganguli)