Gold ends 1.4% lower on worries of further monetary tightening

Gold prices fell sharply at the end of trading today, Sept. 21, paring gains of the prior session, during which the yellow metal touched the highest peak since August-end as markets assessed the path of the Federal Reserve’s monetary policy.

Today’s data from the US Labor Department showed that initial claims for state unemployment benefits shed 20,000 to a seasonally adjusted 201,000 application for the week ended Sept. 16, down to an eight-month low, reflecting the labor market strength despite the aggressive fiscal policy.

US Treasury bond yields rose to their highest levels since 2007, as markets absorbed the Fed's decision to hold interest rates at the current range. This is in addition to the central bank policymakers’ expectations that the monetary tightening cycle would continue for a longer-than-anticipated period.

Markets now do not expect the Fed to cut interest rates at the January 2024 meeting, compared to a more than 15% probability a month ago. Investors are currently pricing in a 40% chance for a 25-basis-point rate hike in the first month of next year.

In terms of trading, bullion for December delivery plummeted by 1.4%, or $27.50, to close at $1,939.60 per ounce — the lowest settlement since Sept. 14.

On the other hand, the US dollar index, which measures the performance of the US currency against a basket of six major currencies, advanced 0.10% at 105.30 points at 08:52 pm Makkah time.