Gold prices rising, benefiting from a weakening dollar
Gold prices rose during early Thursday trading, benefiting from the weakening of the dollar, due to the inverted correlation between the two assets. The greenback lost ground to other major currencies after Wednesday’s rate hike and Fed’s hinting at several more increases until the end of the year, as the move had already been priced into the value of the currency. The weaker dollar will be welcomed by gold bulls, as elsewhere the talks between Russia and Ukraine, which are generating hopes a de-escalation in the conflict, have diminished the safe-haven appeal of the precious metal.
The US dollar index hedged down, following the announcement of the first interest rate hike since 2018 by the Federal Reserve late on Wednesday. The US central bank, as expected, increased its main rate by 0.25% and hinted at further hikes until the end of the year, which may be as many as six, or one per remaining meeting in 2022. However, such developments failed to lift the dollar, as the Fed’s hawkish tilt had been broadcast well in advance over the last few months and the move was already priced into the value of the greenback. Another factor also playing against the dollar, and offering support to currencies more exposed to risk, such as the euro, is the hope that ongoing negotiations between Russian and Ukrainian officials will lead to a de-escalation in the conflict, increasing risk appetite in the markets and diminishing the dollar’s safe-haven appeal.
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