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Title: Gold sulks near 7-month low as dollar basks in safe-haven demand

Jul 06, 2022 02:45AM ET

By: AnalysisWatch

Gold prices hovered near a fresh seven-month low on Wednesday, while the dollar held at a two-decade high, as investors continued to shun precious metals and seek safety in the currency amid rising concerns about the deteriorating global economic outlook.

Spot gold was 0.1% higher at $1,766.54 per ounce at 02:23 AM ET, after falling to $1,762.45, its lowest level since mid-December.Gold futures in the United States were up 0.1% at $1,764.60.

After breaking through support at $1,790 to $1,800 an ounce on Tuesday, gold prices could fall further in the medium term, said Michael McCarthy, chief strategy officer at Tiger Brokers in Australia.

The dual impact of a stronger U.S. dollar due to higher interest rates and higher interest rates themselves directly affecting gold is weighing on the outlook for gold, McCarthy said.

Asian stocks fell and the dollar dominated against the euro on Wednesday as investors' fears intensified that the continent could lead the world into a recession.

The dollar index consolidated near its highest level since 2002, pushing gold prices down as much as 2.6% on Tuesday.

According to Wang Tao, a technical analyst at Reuters, gold prices could test support at $1,756 per ounce and fall to $1,748 if it breaks.

Meanwhile, the Federal Reserve will release the minutes of its June meeting later today, which could give investors a clearer picture of where interest rates are headed.

Calculations by Reuters have shown that more major central banks raised interest rates in June than in any other month in at least two decades, and with inflation at its highest level in several decades, policy tightening is unlikely to ease this year.

Higher interest rates and bond yields increase the opportunity cost of holding gold, which does not yield a return.

Spot silver fell 1.2% to $18.96 per ounce, its lowest level in two years.

Platinum fell 1.3% to $853.67, and palladium slipped 0.1% to $1,932.08.

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