Gold pared its gains on Wednesday, with the gold price falling to $1,845 per ounce as the dollar rallied. If the price of gold decreases, support may be found at $1,782 per ounce, while resistance may be found at around 1,920 per ounce and higher up at $2,000 per ounce.
The price of gold is balanced between conflicting market forces, supported by risk aversion sentiment but pushed down by high dollar and real yields.
The USD, which had been trading in overbought territory, has been slipping since last week but rallied on Wednesday, with the dollar index climbing to the 102.4 level. Bond yields also rose, on Wednesday, with the US 10-year treasury note yielding above 2.7%. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold. As the dollar and US bond yields rise, competing assets, such as gold, become less appealing as an investment.
On Tuesday, the risk-aversion sentiment was renewed, driving stock markets and high-risk assets down. Gold prices benefited from the market sell-off, as traders moved towards safe-haven assets. Even though the dollar has been the most appealing safe-haven asset to market investors for the past couple of months, it has begun to lose its strength.
High inflation rates are also known to support the price of gold, which is often used as an inflation hedge, and with global inflationary pressures increasing, the gold price is once again on the rise. Stalling global economic growth also gives rise to fears of recession, boosting the price of gold. Concerns about the state of the economy in China, after the extensive Covid lockdowns in Shanghai and other cities, also support the gold price.
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