Gold loses its shine as Fed hints at rate hikes

The Federal Reserve surprised the market Wednesday with projections that future interest rate hikes will come a bit sooner than expected. Gold bugs in particular were disappointed.

The price of gold fell 4% Wednesday and was lower again Thursday, falling below $1,800 an ounce for the first time since early May.

While it's true that gold often rises along with inflation fears, Wall Street may have already priced in this scenario. Investors appear to be selling gold now due to expectations that the Fed is taking the threat of inflation more seriously and may move more aggressively to tamp it down.

Higher rates would be bad for gold, which would lose its luster compared to other assets including bonds that tend to benefit in a rising rate environment.

"Prospects of a further rise in yields should cap the upside potential in the yellow metal despite the rising inflationary pressures," said Ipek Ozkardeskaya, senior analyst with Swissquote, in a report Thursday.