Gold prices rally as the dollar sinks

Gold prices rallied on Wednesday, rising to $2,330 per ounce. If gold prices rise, resistance may be encountered near $2,390 per ounce, while if gold prices decline, support may be encountered near $2,280 per ounce. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar plummeted after US inflation showed signs of cooling on Wednesday and the index dropped to 104.7. US treasury yields also dipped, with the US 10-year bond yield yielding 4.32%.

US CPI data released on Wednesday showed that disinflation in the US is finally progressing, putting pressure on the dollar and boosting gold prices. Headline inflation eased to 3.3% year-on-year in May from 3.4% in April, dropping below expectations of a 3.4% print.

Gold prices are affected by central banks’ interest rates. A restrictive monetary policy hinders economic growth lowering the global economic outlook and putting pressure on gold prices. As expected, the US Federal Reserve kept interest rates unchanged at its policy meeting on Wednesday, within a target range of 5.25% to 5.50%. 

Odds of a rate cut in September rose above 60% on Wednesday on easing US inflationary pressures, propping up gold prices. The uncertainty around the US Fed rate outlook is causing volatility in gold prices. 

Gold prices have experienced a meteoric rise recently and are trading in overbought territory. Geopolitical tensions raise the appeal of safe-haven assets boosting gold prices. Concerns that the crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets keeping gold prices high. 

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: