Gold prices increase in early trading on Monday

18 Jul 2022 , 09:49 AM

Gold prices increased on Monday as investors reduced their bets on the Federal Reserve raising interest rates by 100 basis points this month and assisted by a small decline in the value of the US dollar.

By 02:54 GMT, spot gold had increased 0.4 % to $1,713.49 per ounce after dropping last week to its lowest level in over a year. American gold futures increased by 0.5% to $1,711.80.

A nearly 20-year high was reached last week, but the dollar has since retreated 0.1 percent versus its competitors, making greenback-priced bullion more affordable for purchasers using other currencies. According to Stephen Innes, managing partner of SPI Asset Management, “the market scaled back the concept of a 100-bp rate rise when Friday’s University of Michigan inflation component came in weaker.”

“Central bank hawkishness has already been factored in, and with gold holding on to the $1,700 per ounce mark last week, we may see shorts being squeezed a little as hawks could be dissatisfied with the Fed only raising rates by 75 bps next week,” says the author.

In order to tackle the rising cost of living, Fed policymakers indicated on Friday that they would stick to a 75-bp rate rise at their meeting on July 26—27.

At its policy meeting later this week, the European Central Bank is anticipated to raise rates by 25 basis points. Despite the fact that gold is seen as a hedge against inflation, rising interest rates reduce the attraction of metal, which pays no interest.

Market investors are waiting to see if Russia restores the flow of gas through the Nord Stream 1 pipeline on July 21 in addition to important central bank meetings.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings decreased by 0.3% on Friday to 1,014.28 tonnes. Spot silver increased by 0.4% to $18.76 an ounce, platinum increased by 0.8% to $857.30, and palladium increased by 2.2% to $1,869.10.