Gold falls 4% as the dollar rises and interest rate bets rise
On Tuesday, gold prices fell by more than 4% during trading, with some investors preferring to resort to Goldin spot transactions fell by 3.3% to $5,150.89 per ounce by 11:56 GMT, after earlier touching its lowest level since February 20.
US gold futures for April delivery fell by 2.8% to $5,161.50.
Independent analyst Ross Norman said that the dollar “is taking off very strongly,” along with the rise in Treasury bonds. American, which constitutes strong headwinds for gold, especially silver.Silverin spot transactions increased by 9.1% to $81.31 per ounce, after recording the highest level in more than four weeks during Monday’s session.
Dollar pressures and bond yields
The US dollar rose by 0.9%, recording its highest level in more than a month, while US Treasury bond yields jumped.
A rise in the US currency usually leads to an increase in the cost of dollar-denominated gold for holders of other currencies, while raising High returns are the opportunity cost of holding the metal that does not generate a return.
Nasdaq index contracts led the losses of US stock futures indexes, declining 2.3%.
Inflation fears re-pricing interest
The costs of shipping oil and gas jumped globally, fueling inflationary fears, after an official in the “Iranian Revolutionary Guard” announced the closure of the Strait of Hormuz to maritime navigation, with the threat of targeting any ship that attempts to cross.
Although gold is considered a hedge against inflation in the long term, accelerating prices may also lead to higher real yields and strengthen the dollar, which will keep borrowing costs high for a longer period and put pressure on the attractiveness of the non-yielding metal.
According to the “Fed Watch” tool of the CME Group, traders expect the US Federal Reserve to keep interest rates unchanged at the end of its upcoming meeting on March 18. The probability of stabilizing interest rates in June also rose to more than 60%, compared to less than 45% previously.
A positive outlook towards gold
Despite the declines, many analysts still maintain a positive outlook towards gold, including BMI, an affiliate of Fitch Solutions, which suggested the possibility of the metal reaching a record level above $5,600 an ounce this week, unless signs of calming the escalation appear.
Rania Gul, an analyst at XS.com, said that in an environment where geopolitical risks intersect with inflationary pressures and monetary policy complexities, gold is turning into a tool for redistributing risks within investment portfolios. $1665.22.
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