Gold price faces pressure as aggressive U.S. Fed, strong dollar

Following economic statistics that increased anticipation the Federal Reserve will maintain its aggressive rate-hike path, gold prices decreased on Wednesday in international markets as the U.S. dollar and Treasury yields surged. Spot gold was down 0.3% at $1,696.30 per ounce. Higher benchmark Treasury yields are supported by better U.S. economic statistics, which increases demand for the dollar.

As yesterday’s U.S. dollar index crossing of 110 occurred, precious metals gave up the day’s gains. Precious metal prices were put under pressure by the U.S. Service PMI, which fell to 56.9 from 56.7. The dollar’s increasing trend, which veers away from the trend of gold prices, could exert downward pressure on the price of precious metals. At Rs 50,750, there is resistance, and at Rs 50,000, there is support.

Support for silver is at Rs 52,700, and resistance is at Rs 54,400. It is not unexpected to observe the impact on gold given the rise in the probability of a 75 basis point hike to 72%. The 10-year U.S. bond yields were trading at their highest level in the past two months, while the Dollar Index increased by 0.4% to 110.25, a level not seen in more than 20 years. The pressure on the bullion pack will last until the Fed event. In the early trade on Wednesday, spot gold prices at COMEX were trading 0.30% lower than $1697 per ounce.

A stronger dollar and better than anticipated U.S. economic statistics caused gold prices to fall below $1700 per ounce, raising hopes for a swift rate hike from the Fed. The demand for safe-haven metals decreased when the dollar index rose above the 110 level. With COMEX spot gold support at $1676 and resistance at $1720 per ounce, we anticipate gold prices to trade flat to lower for the day. Support and resistance levels for MCX gold in October are 49,800 and 50,500 respectively.

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