Price Performance Indicator

Focus Gold :

• In a week (9/05 – 13/05) ICDX gold price fell 4%.
• Expectations of rising interest rates put pressure on Gold prices.   

Market Review

ICDX gold prices moved 4% lower compared to the previous week with prices moving lower following a 50 basis point increase in interest rates by the Fed, yields on 10-year US government bonds moving to 3% and the US dollar moving to near highs 20 years.

The world gold price touched the figure of $ 1811.46 per troy ounce in the second week of May after previously being at $ 1883.64 per troy ounce in the previous week. The decline in May was caused by the movement of the US dollar index which was in the 103 zone which put pressure on gold price movements in addition to the yield of 10-year US government bonds which moved to the level of 3.142%, the highest since November 2018. The aggressive increase in interest rates made the yield of bonds US debt and the US dollar soared to be the main factors weakening gold prices. When the movement of the US dollar strengthens and yield of US bonds rises, it puts pressure on gold products, because gold as a safe-haven asset does not provide good returns and makes investors prefer to invest in financial products that offer good returns.

Market participants' expectations regarding the release of Consumer Price Index (CPI) data year on year by the Bureau of Labor Statistics were 8.1%, 0.4% percentage point lower than the previous 8.5%, which was the largest annual increase since December 1981 The high CPI value gives a signal to the market that the Fed will raise interest rates aggressively this year, after New York Fed President John Williams said he would raise interest rates to suppress inflation.

Market View

The release of consumer price index (CPI) data year on year by the Bureau of Labor Statistics of 8.1% in April, provides a strong signal of further interest rate hikes by the Fed. The current movement of gold prices will depend on the increase in interest rates by the Fed, if the Fed raises interest rates, gold becomes less desirable, gold as a safe-haven asset will be depressed because gold does not provide good returns so investors prefer to invest in financial products.

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