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Early on Monday, gold lost about 1% in just a few hours. What is currently happening in the gold market?
The precious metal started the new week on a losing streak. At the moment of writing, the price already dropped by 0.84%, or $16.4, to $1,918.4.
Silver was also bearish, falling by 1.74% to $23.837.
Rising demand for the dollar has been the main reason why gold is unable to show growth. The greenback as a safe-haven asset is now more attractive than either gold or silver.
On Monday, the dollar has been on the rise due to anti-risk sentiment in global stock markets. Panic about the spread of Covid-19 is again sweeping through exchanges.
The outbreak of the coronavirus in China is still paralyzing the world economy, disrupting supply chains.
At the same time, the hawkish Fed remains the main driving force for the dollar. The regulator intends to raise the interest rate by 50 basis points in May.
Chairman Powell made an announcement on Thursday, expressing the need for an even more aggressive stance in the wake of record inflation in the US.
Gold plunged at the end of last week on Powell's hawkish statements. The asset fell by 0.7%, or $13.9, to $1,934.3 on Friday.
Overall, the bullion lost more than 2% last week, being bearish for 4 straight sessions.
The drop came due to a sharp rise in the yield on 10-year US government bonds. Last week, the yield soared to its highest level since December 2018.
Like the greenback, the yield went up amid expectations of the Fed's more aggressive monetary policy stance.
On Thursday, Chairman Powell hinted at the possibility of more than one 50 basis points rate hike this year.
At this point, there could be at least 10 rate increases throughout the year. By its end, interest rates may have already been above the levels that are considered neutral.
Clearly, this will be a negative factor for gold. Therefore, the asset is now unable to benefit even from geopolitical and inflationary risks.
At the same time, the tensions in Ukraine are likely to escalate in the coming days. In this light, gold is expected to fall below $1,900.
In the medium term, the precious metal is forecast to trade in the range between $1,900 and $1,950.
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