Gold Prices Impacted by risk-aversion

On Wednesday, the non-yielding metal is almost flat as investors assess the pace of the Fed’s tightening. A buoyant US Dollar keeps gold defensive, though holding above $1800. Gold ETF holdings have fallen for a ninth consecutive day.

The Gold Index is trading negatively in the day, though it remains at familiar levels, trapped in the $1800-20 region amid the lack of a catalyst that can push the bright metal beyond its current boundaries. At the time of writing, XAU/USD is trading at $1813.69

Gold prices are defensive, despite having a risk-off environment, which usually helps the precious metal. However, the USD’s strength overshadows the prospects of gold, as the American currency gains 0.18% against rival currencies, per the US Dollar Index at 103.486.

Fed Chair Jerome Powell said, Tuesday, that “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that. If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.”

The Fed will struggle to achieve a soft economic landing, meaning that could cause a recession if needed to bring inflation down. This environment could be positive for gold, but gold bulls have been unable to challenge the 200-DMA at around $1837, much less the $1890 level, which needed to be reclaimed if they aim to lift prices above $1900.