By Barani Krishnan

Investing.com – Gold prices fell below $1,750 an ounce on Thursday, scalped by the scythe of U.S. bond yields after the Federal Reserve said it will likely end its pandemic-related stimulus support for the American economy by mid-2022 and embark on a rate hike from end of next year.

U.S. gold futures’ most active contract, , settled down $29, or 1.6%, at $1,749.80 per ounce on New York’s Comex, after a session low at $1,745.95.

The potential effect of Fed rates hikes and changes in stimulus on gold prices caused it to drop by as much as 2% for the second week in a row.

The December gold price reached $1,788.25 Wednesday after the Fed announced its timetable for ending monthly bond buying at $120billion and raising the interest rate from 0.25 to 0.25 percent.

“It hasn’t been the best couple of days for gold, with the Fed’s plans to taper and maybe hike next year not exactly conducive with a strong rally in the yellow metal,” said Craig Erlam, analyst at online trading platform OANDA.

“It was on a decent run going into the (Fed) meeting but it quickly failed around $1,780 – (its) prior support – before tumbling once more. The near-term outlook isn’t great, with the next tests coming around $1,740 and $1,700.”

Gold particularly came under pressure on Thursday after yields on the benchmark hit above 1.4% for the first time since July. This yield shows market expectations and the Fed’s response to inflation.

Fed Chair Jay Powell at the conclusion of the central bank’s monthly policy meeting on Wednesday repeated his mantra that inflation was trending above the Fed’s target of 2% per annum due to the higher costs of doing business in a pandemic-constrained economy.

To reflect this, the market has repeatedly shown it doesn’t trust the Fed will be able to control inflation. Bond yields have risen to multi-year highs over the past year since 2020. Yield increases have been most severe for gold, which is a low-yielding asset that has been marketed as a safety net.