Gold Tests $1,900 as Dollar Strength, Prospect of Fed Hikes Outweigh Geopolitical Fears

Gold finds itself flirting with $1,900 an ounce as the strength of the US dollar and the expected upward trajectory of Federal Reserve interest rate hikes outweighs the latest escalation in the Ukrainian conflict with Russia cutting off gas supplies to Poland and Bulgaria. 

This latest measure from Russia, an effective weaponization of energy supplies, has pushed up oil and gas prices and pointed to a negative day for European equity markets amid concerns that other countries, notably Germany, may find themselves forcibly weaned off Russian gas with the associated knock-on effect that would have on its economy. 

Live Gold Price Chart – $/g

Yet despite this bearish sentiment on equity markets, gold finds itself looking downward and is now testing the key psychological level of $1,900 an ounce. A failure to hold above this level, even with the Ukrainian-Russian war providing a clear investment reason for the ultimate haven asset, would illustrate how much the action of the Federal Reserve drives markets. 

With interest rate hikes all but guaranteed by the US central bank in May and June and highly likely in July too, gold’s lack of yield has seen it fall out of favour with investors. 

Considering gold was above $2,000 barely a month ago, the precious metal’s fall from grace has been pretty sharp. That said, $1,900 remains a very high level for gold historically and given the fragile state of markets currently, it wouldn’t take much for renewed fear trading to push its price upward once again.

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 greenwashing while investing sustainably.

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