Gold gains as US dollar, yields, slip

Gold prices edged higher on Monday, climbing above $1,990 per ounce. Gold prices rose slightly, supported by a weaker dollar and US treasury yields. If gold prices increase, resistance may be encountered near $2,048 per ounce, while if gold prices decline, support may be found near $1,950 per ounce. 

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.

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 resumed its decline on Monday, with the dollar index dropping below the 101.4 level. US Treasury yields also slipped, with the US 10-year bond yielding approximately 3.5%. 

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. 

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Written by:
Myrsini Giannouli

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