Gold prices plummet as the dollar rises

Gold prices plummeted on Thursday, dropping to the $1,785 per ounce level. If gold prices decline, support may be found near $1,765 per ounce, while resistance may be encountered near $1,877 per ounce.

The dollar rose on Thursday, with the dollar index climbing to the 104.5 level. US Treasury yields however remained almost flat, with the US 10-year bond yielding almost 3.7%.

Markets were slow in the past couple of days and ahead of the Christmas holidays, after experiencing heavy volatility earlier in the week. The dollar was boosted on Thursday however, by robust economic data for the US. Final GDP data for the third quarter of 2022 revealed that the US economy is expanding at a higher rate than anticipated. GDP for Q3 rose by 3.2%, against expectations of a 2.9% growth. 

Increased rate hike expectations also put pressure on gold prices on Thursday. 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. 

Three major Central Banks, the Fed, the ECB, and the BOE raised interest rates last week. Even though the rate hikes were already priced in by markets, the wave of fiscal tightening reignited global recession concerns, driving gold prices down.

This week, markets will still be digesting last week’s major news and the week is light on fundamentals ahead of the Christmas holiday. US PCE inflation data on Friday may cause fluctuations in dollar and gold prices.

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Written by:
Myrsini Giannouli

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