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  • Writer's pictureanalysiswatch

Title: Gold falls as dollar inches higher; Fed minutes fail to surprise

May 26, 2022 02:22AM ET

By: AnalysisWatch

Gold prices dropped on Thursday as the dollar went up. Some investors cashed in after minutes from a Federal Reserve gathering showed the central bank was likely to remain the course on rate hikes.

At 01:46 AM ET, spot gold was down 0.5% at $1,844.15 per ounce as a firmer dollar hurt demand for gold at the greenback price from buyers holding other currencies. U.S. gold futures slipped 0.2% to $1,843.30.

The U.S. Federal Reserve's pledge to raise interest rates had a bit of an impact on gold prices, with some gains taken as the news came in, and prices could fall to around $1,820, said Brian Lan, managing director at trader GoldSilver Central.

Gold prices recouped some dollar strength-related losses Wednesday after notes from the Fed's May meeting suggested the central bank would not move more aggressively, raising rates again by 50 basis points in June and July to fight inflation.

Longer term, however, investors who know a recession is coming are looking for something of high value to get them through that time, and gold will shine in that, Lan said.

Higher short-term U.S. interest rates and bond yields increase the opportunity cost of holding gold, which does not yield a return. However, gold is considered a safe haven during financial crises.

It was positive for gold that the Fed would make two more half-percentage point rate hikes and then wait for the economic impact, so gold's reaction was quite disappointing, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

The SPDR Gold Trust, the world's largest gold exchange-traded fund, reported its holdings rose 0.2 percent to 1,069.81 tons on Wednesday, from 1,068.07 tons the previous day.

Spot silver fell 1% to $21.74 an ounce, while platinum slipped 0.4% to $939.59 an ounce and palladium fell 0.5% to $1,996.70 an ounce.

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