Gold prices recorded a decline of more than 1% today, Monday, May 16, the lowest level of decline and reached since late last January, with continued demand for bullion priced in dollars.
The US dollar consolidated gains near a two-decade peak, as weak Chinese economic data hurt cyclical currencies, including the British pound and the Australian dollar, according to Reuters.
This data made gold, which has always been seen as a safe haven and competitor to the US currency, less attractive to buyers holding other currencies.
Gold prices today
Spot gold prices fell 0.8% to $1,797.82 an ounce by 9.30am GMT, 11.30am Mecca Time, while US gold futures were down 0.6% to $1,797.40.
Earlier in the session, prices witnessed a decline of 1.4% to the lowest level since January 31, at $ 1786.60, after recording on Friday the fourth consecutive weekly decline.
Spot silver prices also fell 0.2% to $21.02 an ounce, while platinum fell 0.5% to $934.16, and palladium fell 1.3% to $1,918.59.
Matt Simpson, chief market analyst at City Index, said it doesn’t look good for investors in gold at the moment, as it is clear that the momentum that has occurred recently tends to decline further.
He added, “In the event that there is no improvement and stock prices decline, there is a good chance that the lower stocks will withdraw gold with them, so that investors will turn to liquidate their money.”
Impact on Asian markets
Gold prices were affected by the faltering of Asian stock markets, after the shocking weak data from China confirmed the extent of the deep damage caused by the closure related to the resurgence of the Corona virus outbreak in the second largest economy in the world.
Cleveland Fed President Loretta Mester said inflation would need to move lower for “several months” before Fed officials could conclude that it had peaked.
It added that it would be willing to consider raising interest rates faster by the Federal Reserve’s meeting in September, if the data did not show any improvement.
The US Federal Reserve raised interest rates by 25 basis points, as it sought to tighten monetary policy.
Although gold is not considered an inflation hedge, it is sensitive to rising US short-term interest rates and bond yields, which increase the opportunity cost of holding bullion.
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