Dollar’s Strength and Fed’s Inflation Concerns Impact Gold’s Movement
The spot price of gold retreated on Wednesday, dropping below the crucial $1,900 level that holds significance for gold investors. The rebounding dollar, climbing from 15-month lows, exerted pressure on the precious metal.
Gold futures’ active December contract on Comex settled at $1,928.30 per ounce, registering a 0.4% decline on the day. However, spot gold, which reflects real-time physical transactions, was trading below $1,900 in New York’s late afternoon session. Standing at $1,894.49, marking a 0.2% decrease.
Ed Moya, an analyst at OANDA, pointed out that gold’s bearish trend persists with the $1,900 level acting as a significant barrier. If the dollar’s strength persists, Moya noted, gold’s downward slide might extend toward the $1,882 level.
The Dollar Index, measuring the greenback against major currencies, reached a nearly three-month high of 103.412, recovering from last month’s low of 99.22, the lowest since April 2022.
Recent U.S. retail sales data revealed robust consumer spending, hinting at potential inflationary pressures in the near future. Additionally, the Federal Reserve’s latest assessment of inflation and interest rates contributed to the dollar’s strength.
The minutes from the July meeting indicated that. Fed officials expressed concern about inflation’s pace and hinted at the possibility of more rate hikes unless circumstances change.
The meeting led to a quarter percentage point rate increase, anticipated to be the final hike in the current cycle.
As inflation remains above the Committee’s goal and the labor market remains tight, participants foresee considerable upside risks to inflation, potentially necessitating further tightening of monetary policy.