Price of gold rose slightly despite the strong US dollar


During the Tuesday trading morning of 10 May 2022, gold trading rose slightly, despite the still very strong exchange rate of the US dollar (USD), with the US domestic currency reaching its strongest exchange rate in 20 years. According to economic correspondents, in this situation the price of gold strengthened, partly due to a partial momentary decline in US government bond yields and especially due to the sentiment of investors who trust gold in fears of rising inflation and in response to falling stock market prices.

On 10 May 2022, at 7:14 am CET, the price of investment gold was hovering around US$ 1,862.70 per troy ounce, with a daily gain of +0,2206 % on the Commodities Exchange Center (COMEX) commodity market. This price was achieved in a situation where we saw the USD, according to the US Dollar Currency Index,  at a price level of 103.56 with a daily decrease of -0.09%. The USD exchange value decreased from its maximum of 104.06 on 6 May and despite this slight decrease, the USD maintains a very strong position with an annual growth of +14.77%.

The current modest rise in the price of gold was supported, except for the current decline in US government bond yields when for example, the currently 10-year US bond traded with a yield of 3.05% p.a. with the daily decline in yields by -2.9 basis points so far, by a sharp fall in stock market prices. Yesterday’s trading day of 9 May closed the prestigious US stock index with a daily loss of -3.20% and the NASDAQ stock index, which is composed mainly of stocks of technology companies, recorded a daily decline of -4.49%. In this situation, a large proportion of investors consider gold to be a safe haven in times of political and economic crises, even though investment gold is very sensitive to rising short-term interest rates in the US, which increase the opportunity cost of holding precious metals.

However, commodity market analysts do not expect the gold price to continue to rise, but rather to decrease, but with a defined supported price limit of US$ 1,850 per troy ounce. “Looking ahead, the drivers are straightforward for a downtrend in bullion as the potential for higher rates and a stronger dollar have overwhelmed any safe-haven appeal of gold,” said Michael McCarthy, chief of strategy officer at Tiger Brokers in Australia. Last week, the US Federal Reserve raised its benchmark interest rate by the widely expected half a percentage point, the largest increase in 22 years, with further interest rates rising in the United States.