Gold Weighed Down by Dollar and the Fed
Gold prices weakened again on Wednesday (June 24th), approaching their lowest level in almost two weeks and beginning to test the psychological level of US$4,000 per troy ounce. Spot gold fell to around US$4,067 per ounce after touching intraday levels around US$4,050. Meanwhile, US gold futures also weakened to around US$4,083 per ounce.
The main pressure on gold came from the strengthening US dollar. The US dollar index (DXY) rose to a 13-month high as markets grew increasingly confident that the Federal Reserve still had a chance to raise interest rates this year. A stronger dollar makes gold more expensive for buyers using other currencies, thus suppressing global demand for the precious metal.
Expectations of a Fed rate hike are also a significant burden on gold. The market now rates the chance of a rate hike in September at around 70%, and is pricing in the possibility of additional hikes before the end of the year. This makes gold less attractive because the precious metal provides no yield, while bonds and dollar-based assets become more competitive when interest rates rise.
Trend-wise, gold is also in a fairly deep correction. Prices have fallen in five of the last six sessions and are under pressure after recording three consecutive weeks of decline. This condition indicates that selling pressure is not solely driven by a single daily sentiment, but stems from a combination of a strong dollar, high yields, and changing market expectations regarding the direction of the Fed's policy.
From a geopolitical perspective, easing concerns about supply disruptions in the Middle East have also reduced safe-haven demand for gold. Investors are still monitoring the diplomatic process between the United States and Iran, especially after both sides signaled progress toward a broader peace framework. However, uncertainty remains as key issues such as nuclear inspections and access to frozen Iranian funds remain unresolved.
Looking ahead, the market's primary focus will be on the US Personal Consumption Expenditures (PCE) inflation data, due to be released on Thursday. This data is the Fed's favorite inflation indicator and will determine gold's next direction. If PCE levels rise again, gold risks testing the US$4,050 to US$4,000 area. However, if inflation begins to decline, gold has the potential to stage a technical rebound to the US$4,100 to US$4,125 range. (arl)
Source: Newsmaker.id
