Gold prices supported by EU energy crisis

Gold prices held above the key $1,700 per ounce level on Monday, even as the dollar strengthened. If gold prices decline, support may be found again at $1,700 per ounce and further down at the yearly low near $1,681 per ounce, while resistance may be found around 1,765 per ounce and higher up at $1,802 per ounce.

Gold has been retreating, pushed down by the rise of competing assets, such as the dollar and US treasury yields. On Monday, mounting fears of an energy crisis in Europe reduced risk appetite, providing support for safe-haven assets such as gold. The dollar opened the week on a very high note, as the dollar index was catapulted to a fresh 20-year high of 110.25 early on Monday. US Treasury yields remained unchanged, as Monday was a Bank Holiday in the US. 

Fed rhetoric remains firmly hawkish, indicating that the Fed is committed to increase interest rates until inflation has been brought under control. Federal Reserve Chair Jerome Powell recently voiced his determination to bring inflation rates down at the Jackson Hole symposium. Last 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. 

This week, the ECB Monetary Policy meeting on the 8th may affect gold prices, as well as Federal Reserve Jerome Powell’s speech on the same day.

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Written by:
Myrsini Giannouli

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