Gold price has weakened from $1916 to $1761 since the beginning of June 2021, and the current price stands around $1780. Gold remains under pressure amid concerns that the U.S. central bank might raise interest rates sooner than previously expected.
Fundamental analysis: The appreciation of the U.S. dollar negatively influences the price of Gold
Gold price extended its correction from its highs registered in the first week of June after the U.S. central bank turned to a more hawkish stance, forecasting two interest-rate hikes before the end of 2023. U.S. inflation rose in May at its fastest pace in almost 13 years, and investors will continue to pay attention to the bank’s commentary looking for any clues.
“Another regional Fed president revealed yesterday that he is in favour of a first-rate hike as early as next year. This debate is likely to keep Gold in check for the time being and preclude any significant recovery,” Commerzbank analyst Carsten Fritsch said in a note.
Investors usually buy Gold to hedge against inflation, but currently, we had a different practice, and the focus remains on the dollar. The prospect of interest rate hikes positively influenced the U.S. dollar, and the most significant force behind the Gold price slide is the appreciation of the U.S. dollar.
The global business activity is recovering, and those whose interest is to invest in precious metals like Gold should have the U.S. dollar on their “watch list.” On the other side, the global COVID-19 pandemic still poses downside risks to the recovery, and if the U.S. dollar loses its value in the upcoming days, it could help this precious metal to stabilize again above $1800 resistance.
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