Daily Times

Gold price decreased for the third straight week by 0.72 percent amid a worsening demand outlook due to strong US dollar and firm bond yields.

Broad-based US dollar strength and a sharp upsurge witessed in the Treasury bond yields kept non-yielding gold under pressure. The gold futures closed the week on a negative note in the international market at $1,883.10 from $1,896.70 per ounce, shedding $13.60 on a week-on-week basis. The price of 10 grams of 24-carat yellow metal in Pakistan, meanwhile, decreased by 0.75 percent (Rs850) to Rs112,450 from Rs113,300 during the last week. A relatively higher decrease in the local gold prices was due to the Pakistani rupee’s depreciation against the US dollar, which devalued by 0.50 percent last week. As the local currency market opened for only one day during the week due to Eid-ul-Fitr holidays, the impact of rupee/dollar parity on local gold prices remained limited.

Gold is considered a hedge against inflation and geopolitical risks. However, rising US interest rates raised the opportunity cost of holding non-yielding bullion and boosted the greenback in which gold is priced.

Gold fell sharply at the beginning of the week and touched its weakest level since mid-February at $1,850, as the risk-averse market mood provided a boost to the greenback on Monday. Ahead of the US Federal Reserve’s policy announcements, markets remained relatively quiet on Tuesday and gold fluctuated in a tight range below $1,900 after having lost nearly 2 percent a day earlier.

Though the yellow metal managed to stage a rebound in the second half of the week, the broad-based dollar strength didn’t allow it to snap its two-week losing streak. On Wednesday, the Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, hiked its policy rate by 50 basis points to the range of 0.75-1.00 percent.

FOMC Chairman Jerome Powell dismissed the possibility of 75 basis points rate hikes in the upcoming meetings. The benchmark 10-year US Treasury bond yield turned south after the Fed event while the greenback came under strong selling pressure, opening the door for a decisive rebound in the gold prices. On Thursday, gold climbed to a five-day high of $1,909 but ended up closing the day in negative territory at $1,876.90. The last day of the week proved somehow better for the yellow metal and it gained 0.33 percent to lose the week at $1,883.10 per ounce. From a technical perspective, gold’s bearish bias remains intact. The Relative Strength Index (RSI) indicator on the daily chart stays below 50 and the price struggles to pull away from the 100-day SMA, which is currently located at around $1,880.

On the upside, only a daily close above the $1,900 mark could open the doors for additional gains towards the $1,920 to $1,930 area. On the downside, key support seems to have formed at $1,860 (static level). In case this level fails, gold is likely to test the 200-day SMA at $1,840.