The US dollar ($) remains at a two-decade high. Investors await new inflation data to determine how aggressively the Federal Reserve needs to tighten monetary policy to keep increasing prices in line.
On Tuesday, gold prices reversed course and plummeted as the dollar strengthened again. Silver declined 0.8% to $21.61 per ounce on the spot market, while platinum rose 1.3% to $968.05 and palladium fell 1.8% to $2,058.94. The dollar has increased for five weeks in a row as US Treasury rates have risen in anticipation that the Federal Reserve will act aggressively to combat inflation.
Initially, gold appeared to be stabilizing, but investors remain cautious ahead of inflation statistics that will determine how active the Fed will be.
The dollar index increased 0.087% to 103.860 after hitting a high of 104.19 in December 2002, while the euro fell 0.18% to $1.0532. The Japanese yen rose 0.22% against the dollar to 130.30 per dollar, while the sterling, after hitting a 22-month low of $1.2262 at the start of the week, climbed 0.37% to $1.2368. The Australian dollar rose 1.1% to $0.701 after falling to a 22-month low of $0.6911 earlier this week.
As inflation worries continued to roil markets, yields on major U.S. Treasury notes reversed early gains to trade lower on Monday. The Federal Reserve hiked interest rates by 50 basis points last week in an effort to reduce inflation without tipping the economy into recession, and a strong employment report on Friday bolstered prospects for future rises. The consumer pricing and producer price indices will provide further inflation data to investors later this week.
The Fed’s goal of lowering inflation without derailing the economy is difficult but achievable, according to New York Fed President John Williams, despite the increased uncertainty generated by the Ukraine conflict and the COVID-19 outbreak.
