Gold prices dip as dollar rallies

Gold prices dipped below the key $2,400 per ounce level on Thursday, touching $2,370 per ounce. If gold prices rise, resistance may be encountered near $2,483 per ounce, while if gold prices decline, support may be encountered near $2,350 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 firmed on Thursday, with the index rising to 104.4 on robust US fundamentals. US treasury yields on the other hand declined, with the US 10-year bond yielding approximately 4.25%.                

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. The US Federal Reserve kept interest rates unchanged at its policy meeting in June, within a target range of 5.25% to 5.50%, as expected. 

Rate cut expectations in September are currently above 90%, boosting gold prices. The uncertainty around Fed rate expectations is likely to continue in the coming months causing volatility in gold prices. 

Gold prices have experienced a meteoric rise in the past few months 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. Hopes of a ceasefire deal in Gaza, however, are putting pressure on gold prices. Israeli Prime Minister Benjamin Netanyahu signaled on Tuesday that a cease-fire deal may be reached between Israel and Hamas, that would allow hostages to be freed.

Core PCE Price Index data due on Friday may cause volatility in gold prices. Core PCE Price Index is the Federal Reserve's primary inflation gauge and may affect the Fed’s rate outlook.

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Written by:
Myrsini Giannouli

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