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Gold price slips as dollar, yields rise

Home >  Daily Market Digest >  Gold price slips as dollar, yields rise

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Written by:
Myrsini Giannouli

06 April 2022
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Gold price dropped to near $1,918 per ounce on Tuesday, weighed down by the rising dollar and strong US yields. If the price of gold decreases, support may be found near 1,877 per ounce, while resistance may be found at around $2,000 per ounce.

The USD and US treasury yields climbed on Tuesday, with the 10-year treasury yields rising above 2.55% for the first time since 2019, as investors anticipate a more aggressively hawkish Fed policy. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold.

Gold’s safe-haven status supports its price, as reports of violent Russian attacks against Ukraine and the possibility of new sanctions on Russia drive investors away from riskier assets. The conflict in Ukraine has triggered a risk-aversion sentiment, propelling the price of gold to $2,050 per ounce last month. Sanctions against Russia have also been driving commodities up, especially energy-related commodities, contributing to rising inflation. The price of gold benefits from rising inflation, since it is often used as an inflation hedge.

Last week though, reports of advancing peace negotiations between Russia and Ukraine put pressure on the price of gold. In case the crisis in Ukraine is resolved, sanctions against Russia will likely be lifted, reducing the disruption of global commodity and energy supply chains, decreasing global inflationary pressures, and driving the price of gold down. A de-escalation of the crisis still seems to be some way off, however, and attacks against Ukrainian cities were renewed this week.

XAUUSD 1hr chart

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Written by:
Myrsini Giannouli

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