Yesterday’s sharp rise in the US dollar put pressure on gold prices. These two assets usually have an inverse relationship, so this trend looks unsurprising. Gold was trading at $1,777 on Wednesday morning and is heading towards $1,775, where the precious metal will await new signals.
The US currency spiked higher following remarks from US Treasury Secretary Janet Yellen that interest rates could soon be raised in order to prevent the economy from overheating. This sensitive issue – monetary tightening amid unprecedented support for the economy – is of great interest and concern to capital markets. Investors have been constantly parsing statements from the Fed and the Treasury, in search of clues about when stimulus programs will be wound down, so Yellen apparently decided to take the bull by the horns by putting forward this driver.
As long as the dollar stays strong, while risk appetite on the markets remains moderate and stable, gold has little chance of seeing a major rally.