Powell to dash hopes of easing rate hikes, pressuring gold

Gold fell on Thursday amid a hawkish stance by Federal Reserve (Fed) Chairman Jerome Powell. The head dispelled market hopes by announcing a further monetary tightening. 

Analysts' forecasts about the Fed raising interest rates came true at the regulator’s last meeting, with a 75-basis-point hike. Investing.com noted that it is premature to pause further rate increases. 

Despite Powell's hints that rate hikes could be smaller, the central bank is still far from ending its tightening cycle. However, the Fed Chairman reported a potentially higher rate than previously estimated. 

Gold declined as Powell commented on the impact a stronger dollar and higher yields have on the yellow metal. These reasons may contribute to lower risks in the long run. 

Falling prices this week were offset by growing forecasts for the next Fed session, where the regulator isn’t expected to raise rates as much as anticipated. Traders report that there is a 62% chance of a 50-basis-point hike in December. 

In fact, gold has dropped dramatically this year, breaking a two-year low. Thus, rising yields have increased alternative costs for holding the yellow metal. As a result, gold is no longer a safe haven asset, and it also fails to provide a hedge against soaring inflation.

The U.S. inflation rate in 2022 is still high. Further hikes are projected to have a negative impact on the yellow metal's price in the short run.