Gold prices continued to decline on Thursday, dropping below the psychological level of $1,700 per ounce and touching $1,690 per ounce. If gold prices decline further, support may be found at the yearly low near $1,681 per ounce, while resistance may be found around 1,802 per ounce and higher up at $1,870 per ounce.
Gold has been retreating, pushed down by the rise of competing assets, such as the dollar and US treasury yields. The dollar climbed even higher on Thursday, touching new 20-year highs, as the dollar index reached 110. US Treasury yields climbed across the curve with the 2-year note reaching a 15-year high of 3.5% and the 10-year treasury note climbing above 3.2%, boosted by increased Fed rate hike expectations.
Fed rhetoric remains firmly hawkish, indicating that the Fed is committed to increase interest rates until inflation has been brought under control. Last week, Federal Reserve Chair Jerome Powell showed his determination to bring inflation rates down at the Jackson Hole symposium. This week Fed rhetoric continued along the same lines, propping up the dollar. FOMC member Loretta Mester stated on Wednesday that she sees the Fed benchmark interest rate rising to 4% and no rate cuts through 2023.
The pivot of most major Central Banks toward a tighter monetary policy to combat rising inflation rates is putting pressure on the price of gold. Assets yielding interest become a more appealing investment compared to gold, as interest rates rise.
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