Gold extends losses on stronger dollar

Gold prices extended Friday’s losses on Monday dipping to $1,948 per ounce. If gold prices increase, resistance may be encountered near $1,973 per ounce, while if gold prices decline, support may be found near $1,924 per ounce. 

The dollar’s movement has predominantly directed gold prices, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar started to recover on Monday, as markets had time to digest last week’s Fed rate decision and the dollar index climbed to 102.6. Monday was a Bank Holiday in the US and US Treasury yields remained at Friday’s closing levels, with the US 10-year bond yielding 3.77%.

Major Central Banks continue to raise interest rates, causing economic uncertainty, which provides support for the safe-haven gold. The US Federal Reserve paused rate hikes last week, but the ECB raised interest rates by 25bps, boosting gold prices.

The U.S. Federal Reserve kept its interest rate steady at its policy meeting last week for the first time in well 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, however, that its tightening cycle is not over yet and that its peak rate might be higher than anticipated. The FOMC policy statement following the conclusion of the meeting was hawkish, hinting at further rate hikes. Expectations of additional monetary tightening boosted the dollar after the Fed meeting, driving gold prices down.

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Written by:
Myrsini Giannouli

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