Gold

As a direct result of an exceedingly strong U.S. dollar gold prices plummeted today resulting in major technical chart damage. The dollar has gained significant value over the last two weeks, however, longer term studies reveal that the dollar has been on an upward trajectory since the beginning of 2021 when the dollar index was fixed at 90.

The Federal Reserve’s monetary policy composed of aggressive rate hikes in tandem with a balance sheet reduction is intended to achieve price stability through lower inflation. The Federal Reserve is assuming that it can effectively reduce inflation without creating a recession.

Today’s report revealed that there is only marginal relief from rising inflation which continues at a record pace. The Federal Reserve’s preferred inflation report, the Personal Consumption Expenditures price index was released today. Inflation as seen through the PCE came in at 6.3% year-on-year for May equaling inflationary pressures for April.

Speaking at the European Central Bank annual conference in Sintra, Portugal today Chairman Powell made it clear that the Federal Reserve was committed to reducing inflation even if it means raising interest rates to levels that put economic growth at risk.

Both spot gold and gold futures closed lower on the day. However, in both cases, there was fractional buying bidding the precious yellow metal higher as well as dollar strength taking away all of those gains. Spot gold as seen through the Kitco gold index at 3:56 PM EDT, was fixed at $1819.60.