Gold extends losses in Asia after Fed Chair’s stance

Gold extended losses – after falling the most in two months – as a more hawkish-than-expected Federal Reserve underscored the central bank’s aggressive approach to tackling inflation.

Bullion edged lower on Thursday in Asia after plunging 1.5 per cent in the previous session as Fed Chair Jerome Powell didn’t rule out raising interest rates at every meeting to rein in the quickest inflation in a generation.

The tumble wiped out gold’s gains so far this year that were driven by investor bets for a continuation in negative real rates even with rate hikes expected. The hawkish pivot has challenged that narrative, although bullion may still do well as a hedge against inflation and rising geopolitical risks including a potential Russian invasion of Ukraine.

Goldman Sachs Group raised its 12-month outlook for gold to $2,150 an ounce from $2,000 following the Powell comments on expectations for slower US growth, a rebound in emerging markets excluding China and faster inflation.

“This combination of slower growth and higher inflation should generate investment demand for gold, which we consider to be a defensive inflation hedge,” analysts including Mikhail Sprogis said in a note on Thursday.

Spot gold fell 0.2 per cent to $1,815.41 an ounce as of 10.19am in Singapore after being down as much as 0.4 per cent earlier. The Bloomberg Dollar Spot Index rose 0.1 per cent after jumping 0.5 per cent on Wednesday.

Silver, platinum and palladium all dropped.