A weakening in the strength of the US dollar has given gold a slight boost at the start of a new week of trading, with the price now climbing above $1,850 an ounce.
The dollar’s dip is the latest reaction as investors take the chance to fully assess the potential impact of the Federal Reserve’s tightening of monetary policy. Initially, inflation concerns and the withdrawal of stimulus hit equities, particularly growth stocks, hard with gold also dragged down in an environment where multiple interest rate hikes are anticipated.
Live Gold Price - $/oz
Now, having had time to reflect on the broader economic outlook with no new major drivers in recent weeks, there has been an adjustment of prices across asset classes to better reflect their “true” value after a punishing couple of weeks.
The economic outlook isn’t as bad as the brutal sell-off suggested so the week has started with dips for the dollar and gains for equities and gold. While today’s increase is welcomed by holders of gold, how much further the precious metal can climb is likely to be capped by the reality that central banks in both America and Europe are set on a course of interest rate hikes over the coming months.
The readjustment illustrates the underlying support that remains for gold yet with the hawkish environment creating considerable resistance, the price is likely to remain around current levels for the time being.
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