The US dollar rose to a 6-1/2 month high on Monday, boosted by rising bond yields and hawkish comments from ECB President Lagarde. The dollar index (DXY00) closed +0.40% higher on the day.
The 10-year US Treasury note yield climbed to a 16-year high on Monday, as investors anticipated further interest rate hikes from the Federal Reserve. Rising bond yields make the dollar more attractive to investors, as it offers higher returns on US debt.
ECB President Lagarde said on Monday that the ECB's future decisions will ensure that its key interest rates will be set at sufficiently restrictive levels for as long as necessary. This suggests that the ECB is prepared to continue raising interest rates in order to combat inflation.
The euro fell against the dollar on Monday, weighed down by the strength of the dollar and dovish comments from ECB Governing Council member Kazaks. Kazaks said that the ECB's 25 basis point rate hike this month may allow for a pause at its October meeting.
The yen also fell against the dollar on Monday, dropping to a 10-3/4 month low. The yen was under pressure from higher US Treasury yields and dovish comments from BOJ Governor Ueda. Ueda said that the BOJ needs to continue with monetary easing as uncertainties around wage gains and inflation are high.
Precious metals prices posted moderate losses on Monday, as the rally in the dollar and soaring global government bond yields weighed on sentiment. October gold closed -0.47% lower, while December silver closed -1.93% lower.
The strength of the US dollar and the rise in global bond yields are having a negative impact on precious metals prices. Gold and silver are often seen as safe-haven assets, but they become less attractive when the dollar is strong and bond yields are rising.
The dollar is rising on expectations of further interest rate hikes from the Federal Reserve. The Fed is raising interest rates in order to combat inflation, which is at a 40-year high.
Bond yields are rising as investors anticipate higher inflation and interest rates. Higher bond yields make existing bonds less valuable, and this is leading to some investors selling their bonds and investing in other assets, such as stocks and commodities.
The strength of the dollar and the rise in bond yields are likely to continue to weigh on precious metals prices in the near term. However, precious metals prices could rebound if there is a significant decline in inflation or if the Fed signals a pause in its interest rate hikes.
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The US dollar is likely to remain strong in the near term, as investors anticipate further interest rate hikes from the Federal Reserve. This is likely to continue to weigh on precious metals prices.
However, precious metals prices could rebound if there is a significant decline in inflation or if the Fed signals a pause in its interest rate hikes. Investors should monitor the economic data and the Fed's policy closely for clues about the future direction of precious metals prices.
