Gold prices were trading lower on Friday, all set to register the fourth consecutive week of decline amidst a rise in the U.S. dollar and the Federal Reserve raising key interest rates.
Gold futures were trading in the red at $1,813 per ounce as of May 13, 14:11 UTC, at which time the U.S. dollar index futures were trading up at around 104. After Russia invaded Ukraine on Feb. 24, gold saw a rapid spike, moving up from $1,911 per ounce to peak at around $2,078 per ounce on March 8, an increase of 8.74 percent.
However, it has since slipped from these highs, declining for the past three weeks. For this week, gold has fallen by 3.71 percent after opening at $1,883 per ounce. In contrast, the U.S. dollar index futures have been rallying since Feb. 24, moving up from 96 to the current 104, an increase of 8.33 percent.
According to Fawad Razaqzada, market analyst at City Index, gold prices are feeling downward pressure due to the hawkish stance of the Fed and safe-haven flows into the dollar.
The U.S. dollar index was headed for a sixth consecutive weekly gain, hovering close to its two-decade high as the market remains concerned about the Fed’s move to rein in inflation, which they expect would end up negatively affecting economic growth worldwide.
The agency is also looking to reduce its almost $9 trillion balance sheet by selling $47.5 billion worth of assets every month, which will increase to $95 billion per month after three months.
Bullion is sensitive to rising U.S. short-term interest rates and bond yields as this raises the opportunity cost of holding the metal.
With its past three weeks of declines, gold has wiped out any price boost it had gained following the Russian invasion of Ukraine.