Gold prices fell to a more than one-year low on Thursday as investors anticipated the European Central Bank’s policy statement.

By 1106 GMT, spot gold had fallen 0.8 percent to $1,682.49 per ounce, its lowest level since late March 2021.

Gold futures in the United States lost 1.2 percent to $1,680.10.

The ECB has previously signaled a 25-basis-point interest rate rise at its policy meeting on Thursday, but a larger-than-flagged move is also considered as possible given rising inflation. 

“Gold remains as sensitive as ever to central bank hikes, and expect it to take another knock today if the ECB raise rates by 50 bps as concerns morph into reality,” said City Index senior market analyst Matt Simpson.

The metal is also witnessing a secondary response to the fact that it went below $1,700, a significant level that some expected to hold for a longer period of time than it did, Simpson noted.

The Federal Reserve of the United States is also largely anticipated to hike interest rates by 75 basis points at its policy meeting next week. 

Higher interest rates increase the opportunity cost of owning gold, which pays no money, but safe-haven bullion is also considered as an inflation hedge.

The US dollar rose somewhat, making gold more costly for individuals holding foreign currencies.

“Clearly inflation expectations are receding because the Fed and other central banks are embarking on aggressive tightening regime, which is undermining gold’s appeal,” said Ilya Spivak, a currency analyst at DailyFX.

Stock markets and the euro remained stable, as investor worries were calmed by the restoration of Russian gas shipments to Europe. 

In other news, spot silver declined 2% to $18.27 per ounce, platinum fell 1% to $849.31, while palladium climbed 0.4 percent to $1,868.50.

Source: Reuters

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