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Gold pares gains as the dollar rallies

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Written by:
Myrsini Giannouli

11 October 2022
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Gold prices plummeted on Monday, paring last week’s gains. The dollar’s rally on Monday, pushed competing assets down, with the gold price falling below the $1,681 per ounce support to $1,667 per ounce. If gold prices decline further, support may be found at the 2020 low near $1,441 per ounce. Resistance may be found around 1,735 per ounce and higher up at $1,765 per ounce.

The dollar gained strength on Monday, as the dollar index climbed back up above 113. US Treasury yields retained the value they had at closing on Friday, as Monday was a Bank Holiday for the US, with the US 10-year bond yielding almost 3.9%.  

The dollar was boosted on Monday by robust US jobs data released on Friday. In addition, global recession concerns intensified on Monday, propping up the safe-haven dollar, at the expense of competing assets. Sharp rate hikes and continuous fiscal tightening run the risk of tipping some of the world’s leading economies into recession. 

Continued hawkish Fed rhetoric has rekindled expectations of sharp rate hikes, boosting dollar prices. On Monday, FOMC member Charles Evans stated there was a strong consensus at the Fed to raise its interest rate to around 4.5% by March and hold it there until inflation was under control.

Gold prices are under pressure by the shift of most major Central Banks towards a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. In its latest monetary policy meeting, the US Fed raised its interest rate by 75 basis points. Rampant US inflation has raised expectations for another steep rate hike at the Fed’s next policy meeting in November, putting pressure on gold prices.

XAUUSD 1hr chart

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Written by:
Myrsini Giannouli

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