Gold prices surged above $1,846 per ounce on Thursday, but retreated below $1,822 per ounce later in the day, as increased rate hike expectations, outweighed recession fears. If the price of gold decreases, support may be found at $1,786 per ounce, while resistance may be found at around 1,870 per ounce and higher up at $1,920 per ounce.
The dollar also exhibited high volatility on Thursday, with the dollar index fluctuating between 104 and 104.7. US Bond yields fell heavily, with the US 10-year treasury note yielding just above 3%. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold.
Global recession fears have been mounting, supporting the safe-haven gold. On Thursday, disappointing US and EU PMI data, fuelled recession concerns. 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 boosted. High inflation, however, is a two-edged sword for the price of gold, as it increases the chances of Central Banks raising their interest rates, which reduces the appeal of gold.
An increasing number of major Central Banks are moving towards a tighter fiscal policy to tame soaring inflation rates. Last week, the US Federal Reserve voted to raise its benchmark interest rate by 75 points and the BOE by 25 base points. Stalling economic growth, however, combined with fiscal tightening gives rise to fears of recession, further supporting the price of gold.
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