Gold is under pressure amid the hot inflation data from the world’s largest economy.
These losses occurred as pressure from higher US 10-year Treasury yields increased, following the disappointment of early Fed rate cuts in March and May due to strong US inflation statistics.
High inflation data typically creates a negative bias for gold because it increases the likelihood that interest rates will stay elevated, which raises the opportunity cost of owning the non-yielding metal.
The price of gold has dropped to support levels around $2000 per ounce as investors consider the persistent data on US inflation.
Price action shows the yellow metal confirmed breaking the $2017 level after closing below it yesterday, to fall under the correctional bearish pressure again, on its way to visiting the $1988 support level that represents 50% Fibonacci level for the rise from $1810.33 to $2144.59, reminding you that breaking this level will push the price to visit the next correctional level at $1938 per ounce.
The Federal Reserve maintained interest rates in the range of 5.25%–5.50% for a longer period, but the inflation data has turned out to be hotter than anticipated.
Several Fed speakers also cautioned last week that due to concerns over sticky inflation, the bank was not in a rush to lower interest rates. The dollar surged to three-month highs during this period, which put pressure on gold.
The precious metal has proven to be a dependable and valued asset over time, even in the face of a constantly changing investing landscape.
After all, the yellow shining metal has a reputation for being a trustworthy store of wealth among traditional investors.
Investors may also be drawn to gold because of its special advantages, which include protecting against inflation and reducing risk associated with other financial assets.
The surge in interest in gold investing over the past year is probably due to these special advantages. Furthermore, given the recent increase in gold prices, gold investing continues to be quite appealing, so even more people will likely think about investing in the precious metal.
Gold differs from many other assets due to its intrinsic worth, which is strongly correlated with its scarcity. There is a limited supply of gold, unlike other currencies.
Thus, this precious metal’s scarcity makes it more desirable as an investment choice.