Why Are Gold & Silver Down? Here's the Answer from the Dollar and the Fed!
Gold and silver prices slipped in trading on Tuesday (8/7) and continued their decline in the Asian session this morning, amid the strengthening of the US dollar and increasing investor caution ahead of the release of the FOMC meeting minutes. Hawkish comments from a number of Federal Reserve officials also put pressure on the price of precious metals, which have been relied on as a hedge asset amid global uncertainty.
The US dollar jumped after the DXY index rose following expectations that the Federal Reserve would delay interest rate cuts. A stronger dollar makes gold and silver more expensive for global buyers, so that demand for precious metals decreases.
Several US central bank officials, including Loretta Mester and Neel Kashkari, have stated that US inflation is still not tame enough to provide room for interest rate cuts in the near future.
"We need more consistent evidence that inflation is moving toward the 2% target before we act," Mester said in a press statement.
This has caused market players to reduce their exposure to non-yielding assets such as gold and silver.
Gold and silver prices had previously risen quite high, so many investors took profits ahead of the release of the FOMC minutes on Wednesday night US time (Thursday morning WIB). This profit-taking action also put pressure on prices.
The market is now waiting for the minutes of the June FOMC meeting to be released tonight (July 9 US time). Investors are looking for further clues regarding the direction of the Fed's monetary policy going forward.
If the FOMC minutes show a dovish stance or the Fed's desire to cut interest rates in the near future, then gold and silver prices have the potential to rebound.
However, if the minutes show that the Fed remains cautious and hawkish, then precious metals could continue to weaken. (mrv)
Source: Newsmaker.id
