Gold prices slip as the dollar rallies

Gold prices slipped on Thursday, dropping to the $2,380 per ounce level. If gold prices rise, resistance may be encountered at $2,431 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 dipped in early Thursday trading with the index plummeting to 104.1. However, the dollar rallied later in the day, and the dollar index climbed to 104.5. US treasury yields edged higher on Thursday, with the US 10-year bond yielding approximately 4.38%.    

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. 

Fed rate cut expectations are propping up gold prices. The US Federal Reserve kept interest rates unchanged at its latest policy meeting, within a target range of 5.25% to 5.50%. The Fed’s forward guidance was hawkish, indicating that interest rates will remain at high levels for longer. Odds of rate cuts are becoming more moderate, putting pressure on gold prices, as policymakers have stated that they do not intend to start reducing interest rates until there is more evidence of disinflation.

Renewed rate cut expectations propped up gold prices on Wednesday, however after the release of the US inflation report. Inflationary pressures in the US are easing, which may allow the US Federal Reserve to start cutting interest rates by September.

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Written by:
Myrsini Giannouli

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