Gold prices remain unchanged amidst concerns about rate hike

20 Jul 2022 , 09:47 AM

With expectations of aggressive monetary policies and increasing U.S. government rates, demand for gold was muted on Wednesday, leaving gold little changed despite the dollar’s decline.

By 02:48 GMT, spot gold remained unchanged at $1,711.00 per ounce. American gold futures decreased by 0.1 percent to $1,708.80.

Although it maintained its high levels, the dollar declined for a fourth straight day, making bullion priced in the greenback more affordable for purchasers using other currencies. Benchmark Bullion that doesn’t yield decreased in attractiveness when U.S. 10-year Treasury rates increased.

Two people with direct knowledge of the conversation told Reuters that the European Central Bank (ECB) policymakers are considering hiking rates by a larger-than-expected 50 basis points at their meeting on Thursday to curb record-high inflation.

The jump in gold prices that one might generally anticipate from a weaker dollar isn’t happening because the currency is responding to a (éventuelle) more aggressive rate hike by the ECB, according to Innes.

Despite the fact that gold is seen as a hedge against inflation, owning metal, which pays no interest, has a larger opportunity cost due to rising interest rates and bond yields. Australia’s top central banker suggested on Wednesday that preventing a dangerous inflationary cycle would need a regular drumbeat of interest rate increases.

Strong U.S. corporate profits and the anticipated restart of Russian gas supplies to Europe helped raise confidence and allay concerns of a recession, while Asian equities also continued a worldwide gain on Wednesday.

Spot silver increased by 0.2% to $18.77 per ounce, platinum increased by 0.5% to $879.02, and palladium increased by 1% to $1,895.17.