“We are in an environment that is definitely not the best for gold”said Carlo Alberto De Casa, an analyst at Kinesis. He added that bullion is slowing due to the strength of the dollar and expectations of a hawkish policy from the Federal Reserve.
The dollar index, which measures the performance of the greenback against a basket of six currencies, climbed to a maximum not seen since March 2020, driven by the prospect of aggressive rate hikes in the United States and safe-haven flows fueled by the growth slowdown in China and Europe.
“Inflationary pressure may be positive for gold if central banks are unable to keep the price rally in check”De Casa said. The rise in rates in the United States raises the opportunity cost of holding gold, which does not pay interest, while boosting the dollar, the currency in which it is traded. The greenback is also considered a rival safe-haven asset to gold during economic and political crises.
“So $1,900 is clearly a fundamental level for today’s session…Looking beyond that, it doesn’t look ideal right now with the dollar at a 25-month high,” said Matt Simpson, an analyst at City Index.
Source: Ambito
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