Gold prices fell below the psychological threshold of $1,800 on Friday. Meanwhile, India has increased import duty on precious metal to curb entries. Driven by this and the strengthening dollar, the yellow metal is set for its third weekly loss in a row.
Wang Tao: $1,784 paved the way for gold prices
Spot gold hit $1,791.30, its lowest level since May 16. At the time of writing, it was trading at $1,794.10, down 0.7%. U.S. gold futures fell 0.6% to $1,796.10. Reuters technical analyst Wang Tao says spot gold falling below the $1,801 support could lead to a drop to $1,784.
India raises basic import duty on gold
Meanwhile, the dollar continues to strengthen towards the highs of the past two decades. This makes gold less attractive to buyers of other currencies. The government said on Friday that India has raised the basic import duty on gold from 7.5% to 12.5%. That’s because the world’s second-largest consumer of precious metals is trying to curb demand and narrow the trade deficit, he said.
“This is why gold prices are underperforming”
The yellow metal has been caught in the middle of aggressive monetary policies by major central banks. That’s why it recorded its worst quarter since the start of 2021. Bullion prices have lost about 1.6% this week. Meanwhile, benchmark US 10-year Treasury rates hit their lowest level since June 6.
Stephen Innes, managing partner of SPI Asset Management, talks about the dull commodity supercycle driven by front-loaded Federal Reserve rate hikes and a strong US dollar. The analyst says that gold, which has caught a downward attraction, has therefore underperformed despite low Treasury rates. The analyst also makes the following assessment:
Investors prefer gold to protect cash and wealth. However, when the recession hits and central banks need easing, gold prices could drop further before an expected rebound.
“Gold closes this quarter lower due to tighter Fed”
A hawkish tone from global central banks is dampening the appeal for the no-yielding asset. In this environment, gold prices fell on Friday and headed for the worst quarter in five years. Jim Wyckoff, senior analyst at Kitco Metals, comments:
Gold is closing this quarter lower due to tighter Federal Reserve policy recommendations. Also, recession concerns are a good chance to lower demand for commodities.
“Speculative sellers took action to drive prices down”
cryptocoin.com As you follow, the heads of the world’s largest central banks spoke at the ECB’s annual conference in Portugal. Presidents have said that curbing high inflation would be painful and even stifle growth. However, they also noted that rapid intervention is needed to prevent the rapid price increase from settling.
US data showed the personal consumption expenditures price index rose 6.3% in May after rising by the same margin in April. After that, gold prices rose for a short time. However, gold quickly bounced back into the tight range it had been in the last few sessions. Jim Wyckoff interprets this situation as follows:
The data showed that inflation was no worse than last month. That’s why initially traders thought maybe the Fed wouldn’t be that aggressive. This also helped the bottom. However, the market is still bearish and speculative sellers took action to push prices down.
