Gold is trading near to its lowest level of the year as the US dollar becoming the safe haven of choice at this time of economic uncertainty forced the price well below the key threshold of $1,800 an ounce.
In the early part of the year, the stars looked to be aligning for gold to have a stellar year. Inflation was rising, equity markets were falling and then in late February Russia invaded Ukraine. However, what looked on paper to be ideal conditions for a gold rally hasn’t lasted as despite an initial spike above $2,000 an ounce back in early March, the Federal Reserve’s switch to a more hawkish monetary policy has wiped off those gains.
Live Gold Price – $/oz
The Fed’s series of aggressive interest rate hikes has seen the US dollar strengthen and made gold less attractive compared with other assets that produce a yield. While these interest rate moves draw the sting out of gold’s gains early in the year, the ongoing effect has been for the US dollar to keep strengthening versus other global currencies, pulling down the buying strength of assets priced in the greenback, including gold.
Where gold goes from here will be fascinating to see as having held above $1,800 for much of the year, the drop below this level raises questions about the amount of underlying support that remains for the precious metal. The initial signs are that gold is stabilising around the $1,770 level so holders of gold will be hoping this represents the low for now but will be ever more fearful of what the Fed has in store with its interest rate decision at the end of this month.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
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