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Gold Eases As A Hawkish Fed And Weak Euro Lift The Dollar


Gold Futures for April settlement oscillated between $1882 and $1908 per troy ounce on Wednesday. The continuing aggressiveness in the Fed’s monetary policy stance and the weakness in the Euro, exacerbated by the Russian gas-halt to Poland and Bulgaria, lifted the safe haven Dollar and weighed on dollar denominated gold prices.

The Dollar Index, which measures the strength of the Dollar to a basket of 6 currencies, in the meanwhile surged to a multi-year high of 103.10.

Gold Futures for June settlement are currently trading at an 8-week low of $1885.20, down 0.99 percent from the previous close of $1904.10.

Gold has been under pressure ever since the spike in inflation to multi-decade highs goaded the Fed to embark on an aggressive monetary policy stance. The extremely hawkish pronouncements of a rapid interest rate lift off and balance sheet reduction by the Fed had caused the yellow metal to capitulate the safe-haven appeal that was reignited with the geopolitical crisis in eastern Europe.

The surge in bond yields following the Fed’s forceful inflation combat narrative also caused the opportunity cost of holding non-yielding bullion to increase, resulting in lower investor appetite for the precious metal.

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