Gold Ticks Lower as Strong Dollar Dampens Appeal

Gold coins

Gold prices fell on Monday as the U.S. dollar recovered. Bullion prices have fallen for four consecutive weeks and plunged near a nine-low month. The greenback climbed back to its highest level in 20 years. Its strength made the yellow metal more expensive for holders of rival currencies. Another factor against gold is the recovery of benchmark 10-year U.S. Treasury yields.

Spot gold is currently trading at $1,740.36 per ounce as of 0650 GMT.

Meanwhile, Atlanta Federal Reserve Bank President Raphael Bostic supports a 75-basis-point rate hike at the central bank’s July meeting. He does not expect protracted damage to the economy with that much increase in interest rate. Bostic explained that the higher-than-expected jobs growth and the 3.6% unemployment rate reaffirmed the strength of the U.S. economy and the labor market.

City Index senior market analyst Matt Simpson predicted gold prices to slide further to $1,720. Although the bullion has some support at $1,730, any upward movement would only be a retracement given the overall bearish trend.

DailyFX senior strategist Christopher Vecchio added that rising real rates weigh on gold prices. The upcoming release of economic data would not likely provide gold the much-needed boost. In addition, major central banks are raising interest rates, and inflation expectations are receding. Vecchio also mentioned that the IG Client Sentiment Index indicates a bearish trading bias for bullion prices.

FXStreet senior analyst Dhwani Mehta noted that gold prices moved back and forth around the $1,740 level on the dollar’s strength. And it is not likely to change anytime soon because the solid U.S. jobs growth supports aggressive tightening expectations. That would boost the greenback. Mehta believes recession fears and Fed sentiment would continue to influence gold price movement.

In physical trading, demand in India improved as prices eased. Local gold prices dropped from 52,300 to 50,700 rupees per 10 grams. It prompted dealers to reduce discounts from $40 to $28 an ounce. In China, concerns over sporadic COVID-19 outbreaks weighed on consumer sentiment. A local dealer said many consumers fear that there would be more lockdowns in scattered regions.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, dropped 0.11% to 1,023.27 tons on Friday.