Gold is about to drop for the fourth week in a row as the dollar and Fed hike bets lose their appeal
(Reuters) – Gold fell on Friday, and it looked like it would fall for the fourth week in a row. The overall strength of the dollar and the possibility of aggressive interest rate hikes by the U.S. Federal Reserve were putting pressure on gold.
Spot gold fell 0.2 percent to $1,817.39 per ounce by 10:39 GMT. It had reached its lowest price since February 7 at $1,810.86 per ounce. So far this week, gold has lost more than 3% of its value.
The price of U.S. gold futures fell by 0.5% to $1,816.40 per ounce.
Fawad Razaqzada, a market analyst at City Index, said that safe-haven flows into the U.S. dollar and the fact that the Fed is the most hawkish of the major central banks are making gold less valuable.
“Gold hasn’t gotten any help in times like these, when you’d expect demand for safe havens to be high… Many support levels have been broken, which is bad news for short-term traders “Razaqzada added.
The dollar index was going to rise for the sixth week in a row, and it was hovering near a 20-year high. This was because people were still worried that the Fed’s actions to calm inflationary pressures would slow down economic growth around the world. [USD/]
The Fed raised its key overnight interest rate by a bold half of a percentage point last week.
The opportunity cost of holding gold goes up when U.S. interest rates and bond yields go up. [US/]
Rupert Rowling, a Kinesis Money analyst, said in a note, “Gold’s current trading level below $1,830 looks too cheap, but any gains are likely to be capped by a series of rate hikes that make gold less attractive as a non-yielding asset.”
Gold’s recent drop has wiped out most of the gains it made during its initial rally, which was caused by people looking for a safe haven after Russia invaded Ukraine. This drove prices to near-record levels in mid-March.
Spot silver went up by 0.6% to $20.78 per ounce, but it has dropped by about 7% this week, which is the most since late January.
Platinum went up 0.7% to $950.06 and palladium went up 1.5% to $1,936.55, but both were still on track to lose money for the week.
