Gold slides to multi-day low, eyes $1,950 amid stronger USD

Gold extended the previous day’s retracement slide from the vicinity of the $2,000 psychological mark and witnessed some selling on Tuesday. The intraday downfall picked up pace during the early North American session and dragged spot prices to a four-day low, around the $1,957 region in the last hour.

The US dollar stood tall near its highest level since April 2020 and continued drawing support from expectations for a more aggressive policy tightening by the Fed. In fact, the markets have been pricing in multiple 50 bps rate hikes by the Fed. This, along with concerns that the worsening Ukraine crisis would put upward pressure on already high inflation, remained supportive of elevated US Treasury bond yields.

The combination of factors overshadowed worries about the economic fallout from a protracted Russia-Ukraine war and weighed on the precious metal.

Meanwhile, the COVID-19 lockdowns in China, a protracted Russia-Ukraine war, along with a potential European Union (EU) embargo on Russian gas have intensified inflation and growth concerns. The market fears were further fueled by the fact that the International Monetary Fund (IMF) lowered its growth forecast for the global economy.

In its latest World Economic Outlook, the IMF now projects global growth at 3.6% in 2022 and 2023, down from the January projection of 4.4% and 3.8%, respectively. The IMF also warned war-related supply shortages will amplify existing inflationary pressures, which, in turn, could benefit the safe-haven gold’s appeal as a hedge against rising costs. That said, the sentiment will be driven by the Fed rate hike expectations.