Tuesday Jul 05, 2022

Gold hovers close to 10-week low on dollar advance

Gold prices lingered close to a 10-week trough on Thursday, hurt by a robust dollar and expectations of faster U.S. rate hikes.

Spot gold was up 0.3% at $1,890.90 by 1822 GMT. It hit its lowest level since Feb. 17 at $1,871.81 earlier in the session. U.S. gold futures settled up 0.1% at $1,891.30.

“There is a slight uptick in prices as we are currently seeing some short coverings after the recent losses. Shorter-term speculators are taking some profits on their short positions,” said Kitco senior analyst Jim Wycoff.

“It has lately been more downside for gold as the U.S. dollar index hits highs and bond yields rise … The economy remains in pretty good shape and inflation needs to be brought under control.”

The dollar index rallied on Thursday to its highest level since December 2002 amid widespread weakness in its major rivals.

“With the Fed seen hiking interest rate by 50 basis points and possibly 75 basis points in the next two meetings after the May 4, the dollar is going to remain in demand … It’s very difficult to be bullish on gold at the moment,” said Fawad Razaqzada, market analyst at City Index.

Gold has declined about 2.7% this month, which could be its biggest monthly fall since September, on expectations of an aggressive monetary policy tightening by the U.S. Federal Reserve and a stronger dollar.

Rapid rate hikes will increase the opportunity cost of holding non-yielding bullion.

The U.S. economy contracted in the first quarter amid a resurgence in COVID-19 cases and a drop in pandemic relief from the government. Meanwhile, weekly jobless claims fell 5,000 to 180,000. read more

In other metals, spot silver fell 0.8% to $23.10 per ounce, having hit its lowest level since Feb. 11.

Platinum rose 0.3% to $919.92 per ounce and palladium gained 1.1% to $2,227.15.

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