On April 25, 2023, gold prices increased by 0.3% to $1,994.90 per ounce as the dollar retreated. This happens as cautious investors awaits for further US economic data that would help them determine the Federal Reserve's next policy move. US gold futures also rose by 0.3% to $2,005.00. A weaker dollar was boosting gold, which became more attractive for buyers holding other currencies.
The next set of US economic data and the Fed meeting was what investors had their eyes on. They hoped to understand the central bank's stand on rate hikes for the rest of the year. Ajay Kedia, director at Kedia Commodities in Mumbai, stated that until then, gold prices would likely consolidate in the $1,970 to $2,020 range. He added that the overall scenario remained supportive for bullion.
The Dallas Fed's report on Monday revealed that manufacturing activity in Texas contracted in April. This highlighted the economic toll of the Fed's rate tightening cycle.
Markets had an 87.2% chance of a 25-basis-point hike by the Fed at its May 2-3 meeting. Rate hikes tended to weigh on non-yielding gold, even when it was considered an inflation hedge.
Investors were shunning certain Treasury bills and pouring into others as they sought low-risk places to park cash. This was due to rising concerns that the US treasury department could hit its debt limit in the coming months.
The rise of gold prices as the dollar dips could signal a potential shift in the Forex market. Traders often view gold as a safe haven asset, which means that as gold prices rise, investors may shift their investments from other currencies and assets to gold. The dollar index dipped, making it less attractive to traders holding other currencies. Moreover, the next set of US economic data and the Fed meeting could also impact Forex trading as investors may look to adjust their positions based on the outcome of these events. Overall, investors in the Forex market may keep an eye on gold prices as an indicator of market sentiment and potential shifts in trading.