Gold Declines Amidst Aggressive Federal Reserve Actions

By Gina Lee

Gold prices experienced a decline on Thursday morning in Asia, influenced by a stable dollar and rising Treasury yields. This pressure on gold, priced in dollars, comes as the U.S. Federal Reserve maintains an aggressive approach to tackling inflation.

As of 1:31 AM ET, gold dropped 0.20% to $1,812.34. Meanwhile, the dollar, which typically moves in the opposite direction of gold, also saw a slight decrease.

Gold’s daily closing price is closely aligned with the trendline projected from its March 2020 low. According to City Index senior market analyst Matt Simpson, recent fluctuations around this crucial trendline have lacked the momentum necessary for a significant, sustainable shift.

The yellow metal’s performance has largely mirrored the movements of both the dollar and benchmark Treasury yields in recent weeks. A dollar near 20-year highs led to gold hitting its lowest point in over three months earlier this week.

The Federal Reserve’s increasingly hawkish stance on interest rates has also affected gold’s outlook. Fed Chairman Jerome Powell recently indicated that the central bank is prepared to raise interest rates as needed to manage inflation, which he claims poses a risk to the economic foundation.

Simpson noted, "ETF (Exchange-Traded Fund) flows peaked on April 27, but since then, there has been a net outflow as investors have lost confidence in gold. The downturn in stock markets has provided further incentive for some investors to liquidate their gold positions for cash."

In the Asia-Pacific region, recent data showed that April 2022 figures indicated a year-on-year rise in certain economic indicators, along with a significant contraction in trade balance.

In the realm of other precious metals, some recorded minor gains while others experienced slight decreases.