Gold has two major abilities. One is that it is traditionally considered to be a safe haven asset that is in high demand during times of elevated risks in the market, rising inflation, and geopolitical uncertainties. The second is that it acts as an anti-dollar indication because gold prices mostly move in the opposite direction to the Dollar. The Dollar itself has become a safe haven asset in recent months as the Federal Reserve (Fed) has risen interest rates along with Treasuries yields. So, gold prices are now more correlated with the Greenback’s moves.
The U.S. Dollar weakened both last week and this week so far, after surging during the first half of May.
On May 23, gold prices rose from $1844 per troy ounce to $1864 and on May 24 the U.S. Dollar continued to scale back while gold prices rose to $1854 per ounce.
The overall trend for gold was downward amid the strengthening Greenback over recent months. This shows that currently the Dollar is greatly affecting gold prices while surging inflation is not having such a strong upside effect on it. And there seems to be no contradiction as monetary tightening by the Fed and rising Treasuries yields are set to tackle inflation. Inflation should gradually slow down, and eventually pull gold prices up.
Business activity readings and Fed’s Chair Jerome Powell’s testament on Tuesday may affect gold prices, as well as the Fed’s Federal Open Market Committee (FOMC) Minutes that will be published on May 25. Gold prices may also be swayed by the release of the U.S. GDP on Thursday, that is expected to contract by 1.3% in the Q1 2022, and the consumer inflation figures to come out on Friday.
All this data may trigger further monetary tightening by the Fed. If the U.S. monetary policymaker continues to raise interest rates and clear off Treasuries and mortgage-backed bonds from its balance sheet, gold prices may tumble to $1800 per ounce. However, any weak U.S. economy data may prompt the Fed to express caution. In this case the yellow metal may continue to rise toward $1890-1920 per ounce.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2023 Teletrade-DJ International Consulting Ltd
This website is operated by Teletrade-DJ International Consulting Ltd, which is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11. Teletrade-DJ International Consulting Ltd is located at 88, Arch. Makarios Avenue, 2nd floor, Nicosia Cyprus.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.