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Gold prices edged lower on Thursday, dropping to the $1,978 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 rallied on Thursday, with the dollar index rising to the 101.6 level. US Treasury yields rose slightly, with the US 10-year bond yielding approximately 3.51%.
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. Renewed concerns about a banking sector meltdown provide support for gold prices. First Republic Bank announced this week that its deposits fell 40% in the first quarter of this year, and the bank’s stock went into freefall.
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Written by:
Myrsini Giannouli
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