The reason behind the strong dollar and higher yields was the release of the minutes of the December meeting of the Federal Reserve. The minutes confirmed that Fed officials had talked about interest rate hikes, in an effort to tame the increasing inflationary risks. According to Fed officials, the tight labor market could prompt the Fed to raise interest rates sooner than expected, whilst decreasing the bank’s overall asset holdings, in order to control rising inflation.

The market expectations that the Fed will increase its interest rates to control rising inflation, which is growing at its fastest pace in 40 years in the US, were confirmed by the minutes released by the Federal Reserve on Thursday. This increased the opportunity cost of holding bullion and pushed treasury yields and the dollar higher. As a result, gold fell from its major support level of $1,800 on Thursday, and posted a loss of over2% in a single day.

According to data released at 17:30 GMT, the Challenger Job Cuts dropped to -75.3%, from the previous -77.0%. At 18:30 GMT, the unemployment claims from last week came in, showing a surge to 207K, against the forecast of 199K, which weighed on the dollar. The trade balance showed a deficit equal to the the expectations of -80.2B. At 20:00 GMT, the ISM Services PMI figures were released. They dropped to 62.0, in contrast to the projected 67.0, putting downside pressure on the US dollar. The dollar was supported by a 1.6% increase in factory orders, versus the expected increase of 1.5%. Most of the data from the US was unfavorable on Thursday, which kept the losses in gold prices limited for the session.

The losses in gold were also capped by the latest warning issued by the World Health Organization, as the number of coronavirus cases across the globe is increasing rapidly. The head of the WHO, Tedros Adhanom Ghebreyesus, says that the Omicron variant results in a less severe progression of the disease than the globally dominant Delta strain, but it should not be categorized as mild. Authorities worldwide are tightening restrictions, as the Omicron variant continues to drive up the numbers of coronavirus cases globally.