Based on recent global financial market developments, economic correspondents have concluded that gold has been competing hard against US dollar (USD) since April 2022. Reporters from the economic website capital.com predict gold to be the winner of this fight.
On 25 May 2022, at 7:00 am CET investment gold traded on the Commodities Exchange Center (COMEX) commodity market at US$ 1,861.40 per troy ounce, with a daily weakening of -0.2144%. However, according to analysts, over the past 14 days the price of gold had fallen due to the pressure of the rising USD, but has now returned to almost the same level. For comparison, the price of gold on 10 May 2022, at 7:14 am CET was US$ 1,862.70 per troy ounce, which corresponds roughly to today’s value. According to the technical analysis, the data show that since the beginning of 2022 investment gold has strengthened its value by 1.48%, but in the annual comparison it lost -2.58% in the last 52 weeks.
The USD has performed significantly better so far, when its exchange value, measured by the US Dollar Currency Index (DXY), which compares the value of the USD with six other major world currencies, reached a price level of 105. Subsequently, under pressure from the geopolitical situation and internal economic processes in the US, it began to weaken slightly dropping from 104 to 102. According to analysts, the USD exchange value, historically very high, is helped by the monetary policy of the Federal Reserve System (Fed), due to interest rates being raised. However, according to economic correspondents, despite the decline in its exchange rate against other major world currencies, the USD still maintains a relatively strong position as the so-called hard currency. On 25 May 2021, at 7:37 am CET, according to the DXY index, we saw the USD at a price level of 101.97, with the daily gain of + 0.11%.
According to financial market analysts specializing in precious metals, it may seem that the USD is doing better than gold – having gained some advantage – but this situation may go the opposite direction. However in recent days, the USD performance has begun to worsen which has supported the precious metal and reversed the trade trend on the commodity market. Investors are beginning to fear that if the Fed continues to tackle inflation too aggressively and, in particular, by raising interest rates, the US economy may sooner or later enter a recession. As a result, the strength of the USD may not be sustainable in the medium term, and this will be the turning point for gold to push the USD into a corner. Another factor weakening the USD and strengthening the value of gold, despite US and EU sanctions against the Russian Federation due to the military operation in Ukraine, is the significant strengthening of the Russian Ruble (RUB) and previous purchases of gold by the Russian Central Bank.