Gold prices fall to 2 month low on interest rate hike, dollar hits

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Gold prices fall to 2 month low on interest rate hike, dollar hits

On Thursday, gold prices fell to a two month low due to an elevated dollar that hurt demand for the greenback bullion, while an imminent U.S. interest rate hike hurt the appeal of the metal's appeal as an inflation hedge.

Spot gold was down 0.2% at $1,882. After hitting its lowest since Feb. 24 earlier in the session, 49 per ounce was at 49 per ounce. U.S. gold futures fell 0.4% to $1,881. Brian Lan, managing director at GoldSilver Central said that gold has held well above $1,900, but has seen pressure from the dollar and the Fed's underlying factor being expected to raise interest rates by 50 basis points next week.

The dollar index had reached a five-year high of 103.28, and a further push above 103.82 would see it reach levels not visited since late 2002.

A stronger dollar makes gold less attractive for other currency holders.

The benchmark 10 year U.S Treasury yields went up as investors waited for more clarity on the restrictive policy the Fed is going to pursue next week to combat inflation by curbing economic growth.

The opportunity cost of holding non-yielding bullion is increased because of rising U.S. short-term interest rates and higher yields. In times of economic and political crises, gold is seen as a safe store of value.