The yellow metal is down towards the end of the Asian trading session on Tuesday, after hitting the $2,000 mark during the previous New York session.
The decline was as a result of the dollar index, which was trading near a two-year high and dented the safe-haven yellow metal’s appeal, hence the need to trade using technical analysis.
Gold futures is down 0.50%, currently trading $1,977.10 an ounce, as of the time of this writing, after climbing to $1,998.10 on Monday as the war in Ukraine continues and inflation concerns mount. But gold gave up most of Monday’s gains as the dollar and U.S. 10-year Treasury yields firmed.
What you should know
- The dollar index, which measures the strength of the United States dollar and normally moves inversely to gold, edged up on Tuesday, its highest level since April 2020, currently trading at 100.95 basis points.
- The U.S. Federal Reserve is likely to hike its interest rate at its next couple of meetings, while yields on the benchmark 10-year U.S. Treasury note eased off recent highs.
- New York Fed President John Williams said that a half-point rate rise next month was “a very reasonable option,” in a further sign that even more cautious policymakers are on board with faster monetary tightening.
- The possibility of a de facto European Union embargo on Russian gas and the threat of some curbs on crude in Europe’s next sanctions package have bolstered both commodities.
- That’s adding to already elevated raw material prices, fueling demand for gold as a hedge against accelerating inflation.
- The yellow metal’s setback comes as the benchmark 10-year Treasury yield inched higher with investors looking to speeches by Federal Reserve policymakers for new clues on whether the U.S. Fed will raise interest rates by a half-point in May.
- According to City Index’s senior market analyst Matt Simpson, in an interview with Reuters, he explained that “$2,000 per ounce is quite a critical level, and the fact that gold effectively closed flat on the day means there appears to be a slight hesitancy to push immediately higher.” He further stated, “Gold has the ability to overcome the U.S. dollar strength and break above $2,000 possibly over the next week or so.”
- SPI Asset Management managing partner Stephen Innes, in an interview with Reuters, explained that “Now that we’ve tested near $2,000, this will be a bit of an eye-opener towards more traditional gold buyers and more momentum type players, with worries over recession in the U.S. also placing gold to go higher in the medium term.”
As regards other precious metals, silver is down 0.75%, currently trading at $25.95 an ounce.
Platinum is up 0.42%, currently trading $1,019.75 an ounce. Palladium is down 0.93%, currently trading at $2,414.77 an ounce, as of the time of this writing.
