Gold prices lowered over 1.5 percent to their lowest since April 2020 on Friday. Moreover, it hurt by an unrelenting rally in the U.S. dollar and Treasury yields as the Federal Reserve adopts a more aggressive stance to check surging inflation.
Spot gold edged down 1.6 percent at $1,643.51 per ounce after dropping as much as 1.8 percent to $1,640.20 earlier in the session.
U.S. gold futures dropped 1.8 percent to $1,651.
“We’re seeing relentless dollar strength here and that’s going to keep gold vulnerable in the short term,” senior analyst with OANDA Edward Moya stated.
“The economy is clearly heading towards a recession. The risks of a hard landing are elevated and this has been just continuing to drive flows into the dollar, which has been bad news for gold.”
The dollar reached a 20-year high, discouraging demand for greenback-priced bullion, while benchmark 10-year yields jumped to their highest since April 2010.
“This should see (gold) prices trading broadly sideways over the rest of the year,” Fitch Solutions noted.
Gold is highly sensitive to rising U.S. interest rates, as these rise the opportunity cost of holding non-yielding bullion, while raising the dollar, in which it is priced.
“Gold and the other semi-investment metals like silver and platinum will likely continue to remain under pressure until the market reaches peak hawkishness,” head of commodity strategy at Saxo Bank Ole Hansen said.
Other precious metals also declined sharply and were on pace for weekly losses.