World gold prices continued to weaken in the last session of the week and are heading towards their third consecutive week of decline as the strong increase in the USD and the tough stance of the US Federal Reserve (Fed) continue to put pressure on the precious metal.
As of 11:30 am Vietnam time, spot gold price decreased by 1.86% to 4,147.91 USD/ounce. Overall for the week, gold price has decreased by about 1.3%.
Meanwhile, gold futures for August delivery fell 1.93%, to 4,164.75 USD/ounce.
The USD rose to its highest level in a year, making gold more expensive for investors holding other currencies, thereby reducing demand for precious metals.
Mr. Tim Waterer - Chief Analyst at KCM Trade said that the recovery of gold after recent positive signals quickly lost momentum as the market returned to focusing on the Fed's monetary policy.
The upward momentum of gold did not last long. The strong recovery of the USD after the Fed issued a tougher message on inflation has put significant pressure on the gold market," he said.
According to this expert, supporting factors from risk hedging sentiment have been overshadowed by expectations of higher interest rates in the near future.
After this week's policy meeting, the Fed kept interest rates unchanged but signaled readiness to tighten further if inflationary pressure continues to linger.
Currently, 9 out of 19 Fed policymakers believe that there should be at least one wave of interest rate hikes this year.
According to CME's FedWatch tool, the market is currently valuing about 87% of the possibility that the Fed will raise interest rates in December, a sharp increase compared to 61% before the recent meeting.
High interest rates often reduce the attractiveness of gold because this is an asset that does not yield returns.
In another notable development, investment bank Goldman Sachs lowered its year-end gold price forecast to 4,900 USD/ounce, lower than the previous forecast of 5,400 USD/ounce.
Goldman Sachs said that the organization no longer expects the Fed to cut interest rates this year, thereby reducing the upward momentum of gold prices in the short term.
However, many experts still believe that the demand for buying gold from central banks, the trend of diversifying foreign exchange reserves and global economic risks are still important supporting factors for gold in the medium and long term.
On the other precious metal market, spot silver prices fell 2.2% to 64.36 USD/ounce. Platinum lost 1.9% to 1,663.03 USD/ounce, while palladium fell 1.6% to 1,258.04 USD/ounce. All three metals are heading towards a week of price decline.
