The price of gold showed growth on Tuesday, acting as an insurance asset for investors against the backdrop of rapid inflation, despite the fact that the metal was previously unable to break out of a four-week low due to higher interest rates in the United States.
Back on Monday, the price of gold was at its lowest level in a month at $1890.20, but today the price reached $1904.20 an ounce, up 0.3%.
(Spot gold edged up 0.3% to $1,904.20 an ounce by 11:38 GMT. Prices touched $1,890.20 on Monday, the lowest level since March 29.)
US gold futures rose 0.6% to $1,907.00 an ounce.
“Gold is expected to find it difficult to sustain gains as concerns about the Fed’s increasingly aggressive fight against inflation outweigh growing concerns about a potential recession,” said Han Tan, chief market analyst at Exinity.
“If this psychologically important support level ($1,900) gives way, it could encourage gold bears to test $1,875 as support.”
The rapid pace of raising rates by half a percentage point at the next two Fed meetings is causing market anxiety, as it will obviously slow down the recovery of the global economy. Also adding fuel to the fire is the ongoing COVID-19 lockdown in China.
The dollar has strengthened to a 2-year high, making gold more expensive for holders of other currencies, and will limit the rise in the price of gold.
Meanwhile, after a collapse of more than 13%, the price of palladium went into active growth. Even yesterday, having fallen in the afternoon to the minimum mark since March 29 at the level of $2058 per troy ounce, by the end of the day it slowed down the fall, stopping at $2105. Today, autocatalyst palladium is up 1.6% to $2,177.68 an ounce. The precious metal palladium is used in the automotive, electronics and chemical industries.
Statements by Fed Chairman Jerome Powell about the high probability of raising interest rates by 0.5% at a meeting on May 3-4, 2022, and a further increase in June by 0.5-0.7% led to a massive exit of investors from risky assets: bonds, stocks in order to transfer funds to other markets. At the meeting on May 4, a new increase in the interest rate is planned immediately from 0.5% to 1%, with subsequent increases at almost every meeting until the end of the year. This will significantly hinder the attraction of funds into production, reduce the demand for raw materials and the profitability of the production itself.
All the same quarantine in China, where the auto industry is very important not only for the Chinese economy, but for the world as a whole, creates obstacles for the Chinese economy, the risk of production shutdowns and disruption of logistics, and also a decrease in demand for raw materials.
“This year, as semiconductor availability improves, we should see an increase in car demand… Yesterday’s drop should be a very good opportunity to hunt for bargains,” said WisdomTree analyst Nitesh Shah.
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