Gold prices retreated on Wednesday, dropping to the $1,985 per ounce level. If gold prices increase, resistance may be encountered near $2,015 per ounce, while if gold prices decline, support may be found near $1,970 per ounce.
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. The dollar retreated on Wednesday, with the dollar index dropping to the 101.4 level. US Treasury yields rose slightly, however, with the US 10-year bond yielding approximately 3.42%.
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%. There is a lot of uncertainty and speculation on what the Fed is going to do at its next meeting in May. Market odds currently favor another 25-basis point rate hike rather than a pause in rate hikes. 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.
The recent crisis in the banking sector caused risk sentiment to plummet, raising the appeal of safe-haven assets. With stability returning to the banking sector, however, safe-haven assets are starting to lose their appeal as an investment.
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