Gold prices slide on stronger US dollar, yields

Gold prices dipped on Thursday, dropping to the $1,913 per ounce level. If gold prices increase, resistance may be encountered near $1,973 per ounce, while if gold prices decline, support may be found near $1,900 per ounce. 

Fed Chair Jerome Powell delivered his much-anticipated testimony about the Semi-Annual Monetary Policy Report this week before the House Financial Services Committee. His testimony came in two parts and was delivered on Wednesday and Thursday. Powell’s speech on Wednesday had hawkish undertones, pointing to further rate hikes up ahead. Powell stated that inflation still has a long way to go, increasing the odds of another rate hike in July’s meeting. Powell resumed his testimony on Thursday along the same lines, stressing the need to bring US inflation down. Power said on Thursday that a strong majority of FOMC members feel that interest rates should go up further and hinted at the possibility of two more rate hikes.

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 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.

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 and the dollar index touched the 102.4 level. US Treasury yields gained strength on Thursday on increased Fed rate hike expectations, with the US 10-year bond yielding 3.80%.

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Written by:
Myrsini Giannouli

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