(Bloomberg) -- Gold extended losses -- after falling the most in two months -- as a more hawkish-than-expected Federal Reserve underscored the central bank’s aggressive approach to tackling inflation.
Bullion edged lower on Thursday in Asia after plunging 1.5% in the previous session as Fed Chair Jerome Powell didn’t rule out raising interest rates at every meeting to rein in the quickest inflation in a generation.
See More: Powell Backs March Liftoff, Won’t Rule Out Hike Every Meeting
The tumble wiped out gold’s gains so far this year that were driven by investor bets for a continuation in negative real rates even with rate hikes expected. The hawkish pivot has challenged that narrative, although bullion may still do well as a hedge against inflation and rising geopolitical risks including a potential Russian invasion of Ukraine.
Goldman Sachs Group Inc (NYSE:GS). raised its 12-month outlook for gold to $2,150 an ounce from $2,000 following the Powell comments on expectations for slower U.S. growth, a rebound in emerging markets excluding China and faster inflation.
“This combination of slower growth and higher inflation should generate investment demand for gold, which we consider to be a defensive inflation hedge,” analysts including Mikhail Sprogis said in a note on Thursday.
Spot gold fell 0.2% to $1,815.41 an ounce as of 10:19 a.m. in Singapore after being down as much as 0.4% earlier. The Bloomberg Dollar Spot Index rose 0.1% after jumping 0.5% on Wednesday. Silver, platinum and palladium all dropped.
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