Fed, dollar, gold prices

The new US Fed Chairman (Jerome Powell) the other day reaffirmed the Fed’s plans of gradual rate hikes in 2018 due to strong confidence in rising US growth and inflation. These words from him have injected some temporary strength for the Dollar. Gold prices eased off a two-and-a-half week low on Wednesday, as markets took a breather after comments by Federal Reserve Chair Jerome Powell in the previous session weighed heavily on the precious metal. Gold is sensitive to moves in both U.S. rates and the dollar. A stronger dollar makes gold more expensive for holders of foreign currency, while a rise in U.S. rates lifts the opportunity cost of holding non-yielding assets such as bullion.

Gold prices also recovered after data on Wednesday showed that China’s net gold imports increased by 65.2% in January. China is the world’s top gold consumer, hence gold should start a new bullish trend and could trade at levels of $1350 in the coming week.

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