On Friday, gold prices took a little step down as an increase in the value of the United States dollar and concerns over aggressive rate rises by major central banks to combat inflation reduced bullion’s attractiveness.
The opportunity cost of storing non-yielding bullion is increased as interest rates rise since higher interest rates lead to higher bond yields.
As of 5:45 AM (GMT), the spot price of gold XAU= was down by 0.2 percent, standing at $1,715.10 per ounce. On Thursday, prices reached their lowest level in more than a year, which was $1,680.25, before closing the day up 1.3 percent.
The price of gold in U.S. futures contracts GCv1 remained unchanged at $1,713.40 per ounce.
Gold was still on track to post its first weekly gain in the previous six weeks, with a rise of 0.5 percent so far.
The value of the dollar, USD grew by 0.3 percent in comparison to its competitors, which caused bullion priced in greenbacks to become more costly for purchasers holding other currencies.
According to Edward Meir, an analyst with ED&F Man Capital Markets, “Gold is in a downtrend and the rallies that are setting in are short-lived because gold is being pressured by the fact that inflationary expectations are coming down.” This statement was made in reference to the fact that gold is being affected by the fact that inflationary expectations are coming down.
Despite the fact that the economy of the euro zone is suffering from the effects of Russia’s conflict in Ukraine, the European Central Bank joined other central banks around the world in a battle against skyrocketing inflation on Thursday by raising interest rates by a greater amount than was predicted.
The Federal Reserve of the United States is scheduled to have a policy meeting the following week, during which they are likely to decide to hike interest rates by 75 basis points.
“We are holding our breath to hear how aggressive the Federal Reserve will be in their rate outlook. If they continue to believe that inflation is an issue, they will continue to force through more interest rate rises, and this will be highly adverse for the gold market “Meir warned.
The most recent indication that the United States economy is slowing down due to the weight of high interest rates and inflation was provided by data released on Thursday. The data showed that the weekly initial jobless claims in the United States rose to a fresh eight-month high. Factory activity for July also slumped.