Gold prices fell today, Thursday, with the dollar recovering slightly after a large - but widely expected - rise in US interest rates that led to a significant decline in the dollar in the previous session.

By 02:35 GMT, spot gold fell 0.1% to $1,831.63 an ounce, while US gold futures increased 0.8% to $1,833.40 an ounce.

An increase in US interest rates in the short term and an increase in the yield on Treasury bonds increases the opportunity cost of holding non-interest-bearing gold.

And the US central bank raised the interest rate - yesterday, Wednesday - by 75 basis points, the highest level in more than 25 years, to curb the increase in inflation.

As for other precious metals, silver increased in spot transactions 0.1% to $21.67 an ounce.

Platinum rose 0.2% to $940.98 an ounce.

Palladium also rose 0.5% to $ 1870.79 an ounce.

Spot gold fell 0.1% to $1,831.63 an ounce (Shutterstock)

supply and demand imbalances

The US Federal Reserve raised the federal funds interest rate by 75 basis points, to settle interest rates at a range of 1.50-1.75%.

This is the third major interest rate hike since the start of the Corona pandemic, and the first rise by 0.75 percentage points since 1994, which means that Fed Chairman, Jerome Powell, does not want to repeat the mistake of former Fed Chairman Arthur Burns, who led the Fed during a wave of aggressive wage hikes. In the 1970s, he moved slowly in terms of increasing interest rates.

And the Fed stated - in a statement yesterday, Wednesday - that inflation is still high in the US markets, which reflects supply and demand imbalances, high energy prices, and price pressures for other basic commodities.

Russia's war on Ukraine is causing enormous human and economic difficulties, he said, adding that the war and related events create additional upward pressure on inflation and affect global economic activity.

He confirmed that the Federal Open Market Committee agreed to continue reducing its holdings of Treasury securities, agency debt and mortgage-backed securities.

The US market recorded annual inflation last May of 8.6%, the highest level in 41 years, according to data from the US Bureau of Labor Statistics.

According to what the bank announced, the world's largest economy is expected to grow by 1.7% this year, down by 1.1% from the rate that the bank had expected last March.

It should be noted that the US economy achieved a strong growth of 5.7% last year, after recovering from the Corona pandemic crisis.


What about the Gulf central banks?

5 Gulf countries raised interest rates, affected by the decision of the US Federal Reserve.

The Gulf Cooperation Council countries peg their currencies to the US dollar, with the exception of Kuwait.

The Saudi Central Bank raised the repo and reverse repo rates by 50 basis points to 2.25% and 1.75%, respectively.

Inflation in Saudi Arabia fell to 2.2% in May from 2.3% last April.

The Central Bank of Kuwait raised the discount rate by 25 basis points to 2.25%.

And linking the Kuwaiti dinar to a basket of currencies gives the central bank more room to diverge from the policy of the Federal Reserve, if local economic conditions require it.

Central banks in the UAE, Qatar and Bahrain all raised their key interest rates by 75 basis points following the Federal Reserve's decision.

Oman, the remaining member of the six-nation Gulf Cooperation Council, is expected to follow the same path with a similar rate hike.