Gold prices have fallen due to the strengthening of the U.S. dollar, which was anticipated before the release of U.S. inflation data. However, concerns about the economy have kept gold on track for a second consecutive monthly gain. At the time of writing, gold is trading at $1983.74, down $3.245 or -0.16%.
Despite the possibility of another interest rate hike, gold has been supported this month by the weakened dollar and the "safe-haven trade" resulting from fears of an economic downturn and ongoing turbulence in the American banking sector. A sudden worsening of the banking sector crisis could prompt a rush to safe-havens, which is likely to boost gold prices beyond previous records.
The dollar inched up for the day, but it is heading for a monthly decline, which makes gold more affordable for overseas buyers. Investors are now focused on the U.S. core Personal Consumption Expenditures index data for March, due at 12:30 GMT.
The U.S. Federal Reserve is expected to increase interest rates by 25 basis points on May 2-3, which dampens the appeal of zero-yielding bullion. Gold investors are hoping that the Fed is nearing the end of this current cycle of rate hikes.
If the Fed ends the current cycle of rate hikes, gold has sufficient support to keep it trading in the high $1,900s for the foreseeable future, while hints of further hikes needed may push it back down towards $1,900. Additionally, developments regarding the U.S. debt ceiling are also being monitored.
Forex traders are closely watching the movements of gold prices as they can influence the value of currencies. A weaker U.S. dollar, coupled with uncertainty around the U.S. economy, can lead investors to seek safe-haven assets such as gold, which can increase demand and push up prices. Conversely, a stronger U.S. dollar can make gold more expensive for overseas buyers and decrease demand, leading to lower prices. Forex traders can take advantage of these movements by investing in gold or forex pairs that are closely linked to the price of gold, such as USD/XAU or AUD/XAU. Technical analysis can also be used to identify trends and potential entry and exit points in gold trading.