Precious metals markets have been simmering over the past few weeks as the price of gold per ounce nears a six-week low hovering just below $1,700 per unit. Silver crashed into the $18 range, slipping to $17.80 an ounce. While gold and silver fell 0.85% to 0.89% against the US dollar in 24 hours, platinum fell 2.82% and palladium 4.18% against the US dollar over the past day.
Despite torrid global inflation, gold has not been a safe haven in 2022
As the entire world suffers from runaway inflation, many would think that the world’s precious metals would be a safe haven from soaring prices. This has not been the case in 2022, despite the inflation rate in the United States and the euro zone rising above 9% this summer.
In 2022, an ounce of fine gold managed to achieve a lifetime high price against the US dollar at $2,070 per ounce. On the same day (March 8, 2022), an ounce of silver hit a 2022 high of $26.46 per ounce.
Year-to-date, silver is down 23.14% as it traded at nominal US$23.16 per troy ounce on January 1, 2022. Since the March 8 high, silver is down 32% against the nominal US dollar per troy ounce. assess. The nominal US dollar value of gold per troy ounce on January 1, 2022 was $1,827.49 per ounce and at the current value of $1,695.45 per ounce, gold is down 7 .22%.
Additionally, all investors who bought gold at the highest price ever on March 8 have lost around 18.09% in USD value since that day. The values of platinum, palladium and rhodium saw similar declines in value and even more volatility than gold and silver.
Precious metals (PM) have long played a key role in the global economy and traditionally PM like gold and silver have been seen as an inflation hedge. However, that has not been the case in 2022, and the blame lies with a strong greenback and the Federal Reserve’s interest rate hike.
Analysts say dollar strong, hawkish Fed points to falling gold prices, dollar index hits 20-year high
Przemyslaw Radomski, CEO of investment advisory firm Sunshine Profits, told Forbes in late June that a “more hawkish Fed, implying higher real interest rates and a stronger U.S. dollar, both point to lower price of gold”. Market strategist at dailyfx.com, Justin McQueen, says “a stronger dollar and a rally in global bond yields have lifted gold prices.”
fxstreet.com analyst Dhwani Mehta explained on Thursday that gold prices could fall even lower from here, if gold bears hold the market. “Technical confluence detector shows gold price strengthening for next push down as bears target S2 1-day pivot point at $1,700,” Mehta wrote on Sept. 1. The fxstreet.com analyst added:
Should the sellers find a strong position below the latter, a strong sell-off towards the S3 one-day pivot point at $1,688 will be inevitable.
David Meger, director of metals trading at High Ridge Futures, attributes gold’s poor performance to statements by Federal Reserve Chairman Jerome Powell made last week at the Jackson Hole Symposium.
“There is continued pressure on gold because of comments from Powell last week that raised [the] waiting for a more aggressive Fed,” Meger said. “Because gold is a non-interest bearing asset, there will be more competition.”
Additionally, the U.S. dollar index hit a 20-year high of 109.592 on Thursday, and the reasoning behind the robust greenback is placed on an aggressive Fed, according to a Reuters report released Sept. 1.
What do you think of the precious metals market action in recent weeks? Let us know what you think about this topic in the comments section below.
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