Gold declines on dollar strength; holds onto $1,800 due to recession fears

Tuesday saw a decline in gold prices due to rate rise forecasts and a stronger dollar, but growing recession worries kept safe-haven bullion above the critical support level of $1,800 per ounce.

July 05, 2022 3:33 IST | India Infoline News Service

Rate rise expectations and a stronger dollar drove gold prices downward on Tuesday, but rising recessionary worries held safe-haven metal above the crucial support level of $1,800 per ounce.

By 09:07 GMT, spot gold had decreased by 0.4 percent to $1,801.20 an ounce, while U.S. gold futures had not moved to $1,800.80 an ounce.

As the dollar strengthened to levels not seen in two decades, gold lost some of its appeal to foreign purchasers. Carlo Alberto De Casa, an external market analyst with Kinesis Money, said that gold will stay in the $1,750 to $1,900 range for some time.

"The USD's strength is making it difficult for gold to rebound further, but at the same time, investors want gold in their portfolio owing to the high level of uncertainty," says the author.

While interest rate increases have put pressure on the non-yielding asset, gold is nevertheless seen as a hedge against inflation. This week, the minutes of the Federal Reserve's most recent policy meeting and the nation's non-farm payroll figures will be scrutinized for clues about the rate of policy tightening.

According to De Casa, gold is a crucial tool for maintaining financial portfolio balance in the face of current economic instability.

India's gold imports in June nearly tripled from levels a year earlier as prices corrected, and Zimbabwe's central bank announced it would start selling gold coins in the face of out-of-control inflation.

According to Stephen Innes, managing partner at SPI Asset Management, "While we're trapped in the $1,790-$1,830 zone, gold might be supported on recession concerns and perhaps the Fed easing their policy stance as the market pivots from inflation concerns."

Spot silver prices were down by 0.5 percent to $19.86 per ounce, platinum prices decreased by 1.3 percent to $873.94, while palladium prices hardly changed at $1,923.40.

Vladimir Potanin, a Russian billionaire and the major stakeholder of Nornickel, the world's largest producer of palladium, declared himself open to talks about a potential merger with Rusal, in part as a buffer against Western sanctions.

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