Gold prices fell on Tuesday, pressured by a strengthening U.S. dollar which reached its highest level in five months. Spot gold was down 0.6% at $2,320.49 per ounce as of 1:40 PM EDT,according to Reuters.
The dollar index, which measures the greenback against six major rivals, climbed to 105.38, a peak not seen as November 2023. A stronger dollar makes gold more expensive for buyers using other currencies.
Gold is traditionally viewed as a hedge against inflation and a safe-haven asset during times of geopolitical or economic uncertainty. However, it also tends to move inversely with U.S. interest rates and the dollar. Recent economic data from the U.S. has indicated persistent inflation, reducing expectations for near-term interest rate cuts by the Federal Reserve. This has bolstered the dollar and weighed on gold.
“Gold is getting hit by a stronger dollar and a reassessment of the Fed’s rate path,” said David Megaw, chief metals trading strategist at High Ridge Futures, in a note to clients.”The market is now pricing in a much lower probability of rate cuts this year.”
Investors are now awaiting further economic data releases, including the Personal Consumption Expenditures (PCE) price index on Friday, for further clues about the Federal Reserve’s monetary policy path. The PCE is the Fed’s preferred measure of inflation.
Despite the recent decline, gold remains up around 8% year-to-date, supported by geopolitical tensions and continued demand from central banks. The World gold Council reported in February that central banks purchased 290 tonnes of gold in 2023, marking the second-highest annual total on record.
