Gold came under pressure early in the second half of the year. The main reason is the strong dollar. The US currency remains the main catalyst in the precious metals market
In 2022, the gold market is in a storm: in March, after the start of the military conflict in Ukraine, gold prices approached historical highs. However, since the Fed began to tighten monetary policy, the metal has fallen 18% and the dollar has appreciated sharply on the back of rising interest rates, risk aversion and the threat of a recession.
One of the dollar indices hit a record high on July 14, and in trading on Thursday, July 21, bullion priced in dollars tested the lowest level in the last 15 months. The inverse correlation between these assets has peaked since September 2021. According to Wells Fargo’s John LaForge, real interest rates are often a powerful catalyst in the gold market, but now the dollar is doing the job.
“The threat of a recession is supporting gold, but not much. Apparently, the price of the precious metal will consolidate in the range of $1,650-$1,850. But the direction of the breakthrough will depend on the dollar,” the expert noted.