Gold Down, Weighed Down by Aggressive Fed

© Reuters.

By Gina Lee

AiVIF.com – Gold was down on Thursday morning in Asia, with a steady dollar and elevated Treasury yields weighing on the greenback-priced bullion, whose outlook has already been dampened by the U.S. Federal Reserve’s aggressive stance on inflation.

Gold futures edged down 0.20% to $1,812.34 by 1:31 AM ET (5:31 AM GMT). The dollar, which normally moves inversely to gold, edged down on Thursday.

Gold's daily closing price is effectively hugging the trendline projected from its March 2020 low, and intraday volatile spikes on either side of that key trendline have lacked conviction to prompt a sustainable move, City Index senior market analyst Matt Simpson told Reuters.

The yellow metal has largely seemed to track daily moves in both the dollar and benchmark U.S. 10-year Treasury yields in recent weeks. A greenback near 20-year highs pushed gold to its lowest in well over three months on Monday.

Gold's performance and outlook have also been impacted as the Fed adopts a more hawkish monetary policy stance on interest rate hikes.

Fed Chairman Jerome Powell on Tuesday said that the U.S. central bank would hike its interest rates as needed to curb inflation which he said threatened the foundation of the economy.

"ETF (Exchange traded fund) flows peaked on the 27th of April, and we've since seen a net outflow as investors have lost confidence in the yellow metal... and the rout in stock markets simply added another reason for some investors to convert their gold to cash," said Simpson.

In Asia Pacific, Japanese trade data for April 2022 showing that exports rose 12.5% year-on-year and imports rose 28.2% year-on-year. The trade balance contracted to -¥839.2 billion (-$6.51 billion).

In other precious metals, silver inched up 0.1%, while platinum fell 0.9% and palladium was down 0.6%.