Gold prices continued to withdraw on Thursday, falling below the yearly low of $1,681 per ounce support. If gold prices continue to decline, support may be found at the 2020 low near $1,441 per ounce. Resistance may be around 1,740 per ounce and higher at $1,765 per ounce.
The dollar remained strong on Thursday, and the dollar index exhibited low volatility, fluctuating near the 109.7 level. US Treasury yields rose, with the US 10-year bond yielding above 3.45%.
Gold prices are driven down by the shift of most major Central Banks toward a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise.
US CPI data released this week exceeded expectations, propelling the dollar upwards and pushing gold prices down. The Fed is likely to maintain a hawkish stance to combat persistently high inflation rates. Markets are currently wavering between a 50-bp and a 75-bp Fed rate hike in September, with odds favoring a 75-bp rate hike.
The ECB performed its largest ever rate hike last week, raising interest rates by 75 basis points, and pushing gold prices down. ECB President Christine Lagarde hinted at another steep rate hike at the EU Central Bank’s next meeting in October.
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