Gold prices retreated on Monday, falling to the $1,623 per ounce level. If gold prices continue to decline, support may be found at the 2020 low near $1,441 per ounce. Resistance may be around 1,740 per ounce and higher at $1,765 per ounce.
The dollars ascend on Monday put pressure on competing assets, driving gold prices down. The dollar soared on Monday, reaching another 20-year high, as the dollar index went above the 114 level, briefly touching 114.5 early in the day. Elevated US bond yields also diminish the appeal of gold. US Treasury yields soared, with the US 10-year bond yielding touching 3.9%, its highest value since 2008.
Gold prices are driven down by the shift of most major Central Banks toward a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. Last week, the BOE voted to raise its interest rate by 50 basis points, while the US Fed raised its interest rate by 75 basis points on Wednesday. Federal Reserve Chair Jerome Powel has raised expectations for future rate hikes, stating that the Fed is determined to curb inflation even at the expense of economic growth. The ECB has performed its largest ever rate hike, raising interest rates by 75 basis points, pushing gold prices down and ECB officials hint at another steep rate hike at the ECB’s next meeting in October. Switzerland and Canada have also tightened their monetary policies recently.
Gold prices are supported by increased risk aversion sentiment. Russian President Vladimir Putin has announced the partial mobilization of Russian military reserves from civilian conscripts. Putin has also renewed threats to halt energy exports and threatened western allies with nuclear action.
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