Gold falters as U.S. dollar’s jump outshines haven appeal

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Gold futures retreated on Monday, faltering despite a global stock market liquidation as a rising US dollar seemed to overshadow the attractiveness of the yellow metal as a refuge.

Gold for August GC00 delivery,
-1.25%

GCQ22,
-1.25%
fell $ 18.80, or 1%, to $ 1,856.70 an ounce at Comex, while July SIN22 silver,
-1.42%
it sank 1.6% to $ 21.58 an ounce.

Gold rose on Friday as stocks and other assets perceived as risky came under pressure after data showed that the US consumer price index rose to a 40-year high of 8.6. % interannual in May, challenging the expectations of investors looking for evidence that inflation had reached its peak. The reading is seen as causing the Federal Reserve to move even more aggressively than expected to tighten monetary policy in an effort to control inflation, with the risk of a recession.

The Fed is expected to offer a rate hike of 50 basis points, or half a percentage point, when it concludes a two-day policy meeting on Wednesday.

Gold gained despite a jump in the US dollar, but the continued strength of the currency on Monday as world stocks continued to fall seemed to weigh on the metal. Treasury yields also rose, increasing the opportunity cost of having unprofitable assets such as gold.

ICE US Dollar DXY Index
+ 0.47%,
a measure of the currency against a basket of six main rivals, rose 0.6%, trading near the 20-year high.

“The central bank is likely to extend its summer action from two to three rises, and some analysts are talking about the possibility that this Wednesday’s rate decision will surprise with a rise of 75 bp, instead of the 50 bp that it was expected earlier, “said Ricardo Evangelista, a senior. ActivTrades analyst, in emailed comments. “In this context, gold will find support in the flight to safety, as investors abandon riskier assets, however, these gains will be limited by the strengthening of the dollar and the increase in treasury yields.” .



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