The price of the yellow metal has declined to its lowest since mid-February, as the dollar gains more strength, coupled with an imminent interest rate hike by the U.S. Federal Reserve, which has reduced Gold’s appeal as an inflation hedge.
Spot gold is down 0.42%, currently trading at $1,854.21 per ounce, its lowest level since Feb. 16. U.S. gold futures is also down 0.5% at $1,854.40 as of the time of this writing.
The dollar index, the measure of the strength of the United States native currency, trades at 103.63 basis points, near 20-year highs, making greenback-priced gold less attractive for overseas buyers, while benchmark 10-year Treasury yields on Monday hit 3% for the first time since December 2018.
What you should know
- The U.S. central bank’s Federal Open Market Committee (FOMC) will begin its meeting on interest rates later in the day and is expected to hike borrowing costs by half-a-percentage point when it announces its decision on Wednesday.
- The Fed raised its policy interest rate by 25 basis points in March and is soon likely to start trimming its asset holdings, as it attempts to tighten pandemic-era monetary policy and rein in soaring inflation.
- The yellow metal is seen as a safe store of value during times of economic and political crises. Although this is the case, higher short-term U.S. interest rates and bond yields tend to increase the opportunity cost of holding zero-yield bullion.
- Michael McCarthy, chief strategy officer at Tiger Brokers, Australia, explained that there are short-term downside risks for gold and we’ve got a target range of $1,810 to $1,790, with pressure coming from higher interest rates and the dollar.
Russian forces shelled Kharkiv, Ukraine’s second-largest city, and devastated several towns in eastern Ukraine, while the European Union prepared sanctions on Russian oil sales after Germany said it was ready to back an embargo.
In other precious metals, silver is up 0.28%, currently trading at $22.65 an ounce. Platinum is up 0.61%, currently trading at $938.70 an ounce. Palladium is up 1.50%, currently trading at $2,249.02 an ounce, as of the time of this writing.