Gold - the price of the precious metal falls, the dollar goes up

Gold today fell to $1935 an ounce, the lowest level since mid-March 2023. This means that since the peak that was set this month, the price of gold has fallen more than 6%.

What can affect gold and the price of the precious metal?

Gold fell below $1950 an ounce on Tuesday, staying near a two-month low, weakened by hawkish betting Federal Reserve US and the news that a tentative agreement on the US debt ceiling was reached over the weekend.

Gold CFDs. CMC Markets platform Next Generation.

President Joe Biden and Speaker of the House Kevin McCarthy reached a substantial agreement over the weekend to suspend the $31,4 trillion debt ceiling and expressed confidence that both Democrats and Republicans would support the deal.

Meanwhile, stronger than expected economic data from the US strengthened expectations for further interest rate hikes by the Fed. Markets are now pricing in a better chance of the Fed making another 25 basis point rate hike in June, a change from earlier expectations of a break in the tightening cycle.

Gold is very sensitive to interest rate prospects as higher interest rates raise the opportunity cost of holding an underperforming bullion, making it less attractive.

Dollar up, gold down

Gold is priced in USD on global markets, so in theory, the weaker the dollar, the higher the price of gold, and vice versa, the stronger the dollar, the weaker the gold price. Meanwhile, the Dollar Index held above 104 on Tuesday, hovering near a ten-week high, supported by strong US economic data that boosted expectations for further monetary policy tightening.

CFDs on CMC USD Index. CMC Markets platform Next Generation.

Data released on Friday showed that US PCE prices, the Federal Reserve's preferred inflation rate, rose more than expected in April. US consumer spending and durable goods orders also exceeded forecasts in April, indicating the US economy remains resilient in the face of higher interest rates.