Gold prices were particularly volatile on Wednesday. Gold slipped early on Wednesday, falling to $1,828 per ounce, its lowest price in two weeks. Gold pared its losses later in the day though, climbing to $1,850 per ounce. If the price of gold decreases, support may be found at $1,786 per ounce, while resistance may be found at around 1,920 per ounce and higher up at $2,000 per ounce.
The price of gold is balanced between conflicting market forces, supported by risk aversion sentiment but pushed down by high dollar and real yields.
As the dollar and US bond yields rise, competing assets, such as gold, become less appealing as an investment. On Wednesday, the dollar gained strength, with the dollar index climbing to 102.5%, supported by robust economic data and hawkish Fed rhetoric. US treasury yields also climbed on Wednesday, with the 10-year Treasury note yielding above 2.9%. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold.
Increased risk aversion sentiment due to the war in Ukraine has boosted gold prices over the past few months. As however, the crisis drags on, and risk sentiment is slowly returning to markets, undermining gold price.
High inflation rates are also known to support the price of gold, which is often used as an inflation hedge, and with global inflationary pressures increasing, the gold price is boosted.
Stalling global economic growth also gives rise to fears of recession, further supporting the price of gold. Concerns about the state of the economy in China, after the extensive Covid lockdowns in Shanghai and other cities, also boost the gold prices.
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