Gold remains firm as the dollar dips

Gold prices remained steady on Tuesday, oscillating around the $2,330 level. If gold prices rise, resistance may be encountered near $2,340 per ounce, while if gold prices decline, support may be encountered near $2,290 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 continued to decline on Tuesday and the dollar index dropped to 105.7. US treasury yields also declined, with the US 10-year bond yielding 4.44%.      

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. 

Odds of a Fed rate cut in September are currently around 70%, while a rate cut by November is fully priced in. The uncertainty around the US Fed rate outlook is 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. Israel threatens to declare an all-out war with Hezbollah, which will destabilize the region further.

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Written by:
Myrsini Giannouli

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