Gold Drops to Six-Month Low as Dollar Surges on Recession Fear
Comment of the Day

July 05 2022

Commentary by Eoin Treacy

Gold Drops to Six-Month Low as Dollar Surges on Recession Fear

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Gold slumped to the lowest in more than six months as the dollar rallied amid growing recession fears that caused losses across risk assets.

The greenback surged to the highest in more than two years as investors retreated to the haven, putting pressure on bullion. US stocks briefly slumped more than 2% amid fears that the Federal Reserve’s rate hikes to damp inflation could cause a slowdown in the world’s largest economy.

A pronounced drop in the euro also aided the dollar’s gain, driven by bets that the European Central Bank will be slower to tighten monetary policy than the Fed. Recession concerns in the bloc are particularly acute due to fears Russia will cut supplies of natural gas. 

Gold fell 1.9% to $1,774.26 an ounce, after earlier touching the lowest since mid-December 2021. The Bloomberg Dollar Spot Index climbed 1.1%. Silver and platinum slid, while palladium edged lower.

Eoin Treacy's view

The Dollar is not only rallying against the Euro and Pound. It is surging against just about every currency. The Bloomberg Dollar Index, which has less of a Euro weighting, is rallying to test the 2020 peak. The regular Dollar Index has already broken higher.

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