This week, gold prices rose to multi-month highs, touching the $2,030 per ounce level. Gold prices edged lower on Thursday, dropping to $2,030 per ounce but remained strong, supported by low-risk sentiment. If gold prices increase, resistance may be encountered near $2,070 per ounce, while if gold prices decline, support may be found near $1,944 per ounce. Gold prices soared this week, driven by decreasing US rate hike probabilities. The recent crisis in the banking sector caused risk sentiment to plummet, raising the appeal of safe-haven assets.
Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. Dollar prices as stable on Thursday, with the dollar index remaining below the 102 level. US Treasury yields dipped on Thursday, with the US 10-year bond yielding approximately 3.29%.
The Federal Reserve raised interest rates by only 25 basis points at its meeting in March, bringing the benchmark interest rate to a target range of 4.75% to 5.00%. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise.
There is a lot of uncertainty and speculation on what the Fed is going to do at its next meeting in May as concerns about a banking sector meltdown remain high. Market odds are currently split between another 25-basis point rate hike and a complete pause in rate hikes. The Fed has already slowed the pace of rate hikes and may have to discontinue it's tightening policy to prioritize financial stability over its fight against inflation.
US labor data on Friday and especially NFP payrolls may cause volatility in dollar prices, which may be transferred to gold prices.
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