Gold prices continue to decline on hawkish Fed

Gold prices sank on Wednesday, dropping to the $1,905 per ounce level. If gold prices increase, resistance may be encountered near $1,968 per ounce, while if gold prices decline, support may be found near $1,900 per ounce.

Fed Chair Jerome Powell, speaking at the ECB Central Bank Forum in Sintra, Portugal, on Wednesday, warned that further tightening should be expected. Powell stressed that a pause in June was required to assess the progress of US inflation but stated that consecutive rate hikes may be resumed if required. Powell added that the majority of FOMC members are in favor of two more rate hikes this year. Powell’s unwavering hawkish stance boosted the dollar on Wednesday, putting pressure on gold prices.

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 edged higher on Wednesday and the dollar index rose to the 102.9 level. US Treasury yields retreated slightly, however, with the US 10-year bond yielding 3.72%.

The U.S. Federal Reserve kept its interest rate steady at its June policy meeting for the first time in over a year. Fed officials have voted to keep the central bank’s interest rate at a target range of 5.00% to 5.25%. The Fed has signaled that its tightening cycle is not over yet and that its peak rate might be higher than anticipated. Expectations of additional monetary tightening boost the dollar, driving gold prices down. 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. 

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: