Gold falls below $1,700 on dollar strength and bets on rate hikes

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The price of gold fell below the key $1,700 level on Thursday for the first time since July as the dollar’s rally and expectations of aggressive interest rate hikes dampened its appeal.

* Spot gold fell 0.8% to $1,696.81 per ounce by 1608 GMT, after hitting its lowest level since July 21 earlier in the session. US gold futures fell 1.2% to $1,706.10.

* Gold is considered a safe store of value in times of economic uncertainty, but a higher rate environment tends to dull the non-interest bearing asset.

* “If the Federal Reserve sticks to its inflation mandate, keeps rates high and refrains from cutting them even in a recession, it will not bode well for gold,” said Daniel Ghali of TD Securities. “If gold breaks below the $1,675 range, we expect significant selling pressure to emerge.”

* Reflecting investor sentiment, holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell to 31,294,673 ounces on Wednesday, the lowest since January.

* The dollar index hit a 20-year high after data showed US manufacturing growth in August and a drop in the number of people filing for new jobless benefits last week, giving the Fed more room to rise sharply. aggressive rates.

* A higher dollar makes bullion more expensive for foreign buyers. Yields on US Treasury bonds also rose, raising the opportunity cost of holding.

* In other precious metals, spot fell 1% to $17.18 an ounce, after hitting its lowest level in more than two years; platinum was down 2% at $829.02 and  was down 3.3% at $2,014.76.

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