Purebun.com – Gold Prices Drop After US Dollar Touches Highest Level in 20 Years. Today’s world gold prices were slightly pressured in fairly limited trading on Tuesday. The weakening of gold prices was because the US dollar exchange rate continued to climb and reached its highest level in 20 years. The strengthening of the US dollar has eroded the attractiveness of safe haven instruments such as gold.
Quoting CNBC, Wednesday (15/6/2022), the price of gold in the spot market fell 0.4 percent to USD 1,811.59 per ounce at 13:54 EDT. Meanwhile, US gold futures fell 1 percent to USD 1,813.50 per ounce.
“The main thing driving gold right now is the anticipation of a very aggressive Fed in terms of a rate hike tomorrow, given the recent inflation data,” said RJO Futures senior analyst Bob Haberkorn.
The US dollar exchange rate rose higher against a basket of currencies to hit a new high in two decades, making gold expensive for buyers with currencies outside the US dollar.
“Short-term, this still looks like a tough situation for gold, but will eventually continue that safe-haven role. Gold sentiment just needs to outpace this strong US dollar,” said OANDA senior analyst Edward Moya.
According to the CME Fedwatch Tool, the percentage of market participants who expected the US Federal Reserve (the Fed) to raise interest rates 75 basis points jumped to 96 percent.
Such an increase would be the largest since 1994, increasing the opportunity cost of holding non-yielding bullion.
Other data showed the Labor Department’s producer price index for final demand rose 0.8 percent in May after rising 0.4 percent in April. This is in line with expectations.
Gold Price This Week Predicted Stable
Based on the latest data from the Institute of Supply Management (ISM), gold prices held at USD 1,860 per ounce as the momentum in the services sector was slightly weaker than expected in May.
Quoted from Kitco.com, Monday (13/6/2022), the Non-Manufacturing Purchasing Managers’ Index stood at 55.9 percent last month, down from 57.1 percent in April. The 1.2 percentage point drop somewhat disappointed the market, with consensus estimates calling for the index to come in at 56.4 percent.
A reading above 50 is seen as a sign of economic growth the further an indicator is above or below 50, the greater or less the rate of change. May marked the lowest reading since February 2021, when the index also stood at 55.9 percent.
Looking in more detail, the new orders sub-index came in at 57.6 percent, following April’s reading of 54.6 percent. The business activity sub-index was at the level of 54.5 percent compared to 59.1 percent in the previous month.
The employment index returned to expansion territory, rising to 50.2 percent after April’s reading of 49.5 percent. Economists look to the latest figures as a gauge of the country’s employment situation.
“COVID-19 continues to disrupt the service sector, as well as the war in Ukraine. Labor is still a big problem, and prices continue to rise,” the report said.
Meanwhile, inflationary pressures eased from an all-time high recorded in April, with the price index dropping to 82.1 percent in May from 84.6 percent the previous month. A series of these sentiments are still influencing gold prices this week.
Last Week’s Gold Price Movement
Gold was largely unchanged as it held on to the USD 1,860 per ounce level following the release of the data. August Comex gold futures last traded at USD 1,863.10, down 0.44 percent on the day. Gold is more sensitive to non-farm payrolls data published earlier on Friday.
Kitco senior analyst Jim Wyckoff, said the newly released US unemployment situation report for May showed US non-farm payrolls rose by 390,000. That number is expected to show an increase of 328,000. An increase of 428,000 was reported in the April data.
“The unemployment rate in May was 3.6 percent and is expected to be 3.5 percent versus the 3.6 percent reported in April. The closely watched average hourly earnings figure shows an increase of 5.24 percent annually,” Wyckoff said.