US Dollar Strength Weighs on Gold as Silver Edges Higher
Gold futures closed slightly lower on Tuesday while silver inched up, as the precious metals remained within 'a solid support range' amidst a firming US dollar and declining oil prices.
The strength of the US dollar has traditionally been negative for gold, according to TD Securities global head of commodity strategy Bart Melek. He stated that despite oil trending down somewhat, the market is continuing to robustly price Fed hikes.
Recent statements from St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee signaled a need for further rate hikes to combat inflation stemming from strong demand and rising energy prices. This followed last week's Federal Reserve rate hike and Chair Kevin Warsh indicating more increases in the months ahead.
Traders now see a 90% chance of a rate hike in December, according to the CME FedWatch Tool.
Silver is facing competing forces as tighter monetary policy raises the opportunity cost of holding non-yielding assets. However, its industrial role provides support, with nearly half of silver demand coming from industrial uses.