Pressure on the yellow metal has increased after the US CPI hit a new 40-year high. As a result, gold prices fell sharply on Thursday. The US dollar, on the other hand, rose to its highest levels in the last 20 years. This played a major role in making the shiny metal close at its lowest in more than a year.
US dollar strengthens, increasing pressure on gold prices
Spot gold was trading at $1,706, down 0.2% at press time. U.S. gold futures fell 0.3% to $1,700. cryptocoin.com Earlier this year, gold prices rose above $2,000. However, precious metal prices have been on a downward trajectory since then. Analysts largely blame the strong US dollar on gold for this.
Meanwhile, the US dollar hit its highest level since 1998 against the Japanese yen on Thursday. USD/JPY is approaching 140 yen against the dollar as the Bank of Japan adheres to loose monetary policy framework. In the US, investors expect the Federal Reserve to raise rates by a full percentage point after its July meeting. In addition, this expectation is gaining strength. “Everything is fine,” Raphael Bostic, president of the Atlanta Federal Reserve Bank, said yesterday when asked about his expectations for a full percentage point increase. Bostic is not a member of the Fed’s rate-setting committee this year. But it will be next year.
Peter Spina: Don’t expect a record-breaking run for gold right now
GoldSeek’s president and CEO, Peter Spina, said Thursday’s losses for gold present a “perfect opportunity” to hoard the precious metal. However, the analyst makes the following assessment:
Just don’t expect a record-breaking run for gold right now. It is possible for the yellow metal to rise to $1,900-2,000 again. However, it is unlikely that we will see the gold price break out of this price range where we are stuck, until we see the Fed directing aggressive rate hikes.
“If the recession becomes the main issue, the situation for gold prices may change”
Craig Erlam, senior market analyst at OANDA, shared his views on the markets. The analyst notes that while the yellow metal appears fragile, that could change if recession becomes the baseline situation. He says this assuming that security-seeking investors rediscover gold and Treasures. In this context, the analyst explains his views as follows:
After all, gold is a safe haven. A point is likely to come when the economy will be overwhelmed by the weight of inflation and interest rates, and gold will become increasingly in demand.
