Gold extends gains as the dollar weakens

Gold extended gains on Thursday as the dollar weakened. Gold rose above the $1,784 per ounce resistance level, touching $1,795 per ounce. If gold prices decline, support may be found near $1,739 per ounce, while further resistance may be encountered at $1,810 per ounce.

The dollar tumbled this week, as increased recession concerns reduce the odds of higher Fed interest rates. The dollar index dropped below the 105.0 level on Thursday, touching 104.7. US Treasury yields remained steady, with the US 10-year bond yielding between 3.5% and 3.4% throughout the day.

The US central bank’s next monetary policy meeting is scheduled for next week on the 14th and traders are trying to gauge the Fed’s intentions. A Fed blackout period has started on Saturday, which will last until the meeting, during which FOMC members do not deliver speeches that may reveal the central bank’s policy direction. The dollar maintained low volatility this week in the absence of more significant economic indicators and Fed rhetoric. 

Market expectations of future rate hikes were considerably trimmed in the past couple of weeks on cooling US inflation. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Gold prices edged higher under diminished expectations of rate hikes. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise.

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Written by:
Myrsini Giannouli

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