Gold declines against stronger dollar, rate hike worries

Gold prices declined to a more than one-month low on Thursday, as the dollar firmed. There are prospects of the U.S. Federal Reserve continuing with its aggressive policy tightening stance weighed on the zero-yielding bullion’s appeal.

Spot gold declined 0.2 percent to $1,706.99 per ounce, as of 0100 GMT, after hitting its lowest level since July 21 at $1,704.94 earlier.

U.S. gold futures were down 0.5 percent to $1,717.50.

The dollar index rose 0.1 percent, while the benchmark U.S. Treasury 10-year yields rose to their highest level since June 28.

The Fed will need to increase interest rates somewhat above 4 percent by early next year and then hold them there in order to bring too-high inflation back down to the central bank’s goal, according to Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday.

Euro zone inflation climbed to another record high and will soon hit double-digit territory, heralding a string of big interest rate hikes even as a painful recession appears increasingly certain.

U.S. private payrolls rose moderately in August, according to the ADP National Employment report.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings declined 0.3 percent to 973.37 tons on Wednesday.