Gold falls on Fed's higher-for-longer stance

Gold prices decline as a result of the Federal Reserve's higher-for-longer approach.

Gold fell for the third day on Thursday, as the dollar and bond yields went up after the U.S. Federal Reserve said it might raise interest rates again.

Spot gold fell 0.5% to $1,919.78 per ounce. Gold prices in the U.S. ended the day down 1.4%, at $1,939.60 per ounce.

Wednesday, the Fed did not change interest rates, but its updated quarterly forecasts showed that rates could go up again this year and stay tight until 2024.

According to Ryan McKay, a commodity strategist at TD Securities, some long positions have been liquidated due to the downward trend in gold, which is related to the narrative that higher prices would persist for longer and that a soft landing is imminent.

"Over the next few days, systematic funds could switch to a net short position, adding to the pressure."

The dollar rose to a high not seen in six months, while standard 10-year Treasuries stayed at a high not seen in 16 years; this made bullion priced in dollars, which does not pay interest, less valuable. But gold has stayed strong above the psychologically important $1,900 mark.

Ole Hansen, head of commodity strategy at Saxo Bank, said in a note that traders and buyers are looking for a way to protect themselves "should the Fed fail to deliver a soft landing in the coming months."

The CME FedWatch tool shows that the markets thought there was a 45% chance of another rate hike this year and a 40% chance that the Fed would ease in the first half of 2024.

"There is no doubt that a part of the market still thinks there is a higher chance of a recession," said McKay. "Both physical demand and demand from central banks has stayed pretty strong, too."

Platinum fell 0.8% to $921.33 per ounce, while silver rose 0.9% to $23.45 per ounce. Palladium fell 0.8% and is now worth $1,264.71.