A sharp decline in gold results in major technical chart damage

NEW YORK (July 6)  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 dollar index compares the U.S. dollar to a basket of six major currencies. Today the dollar index gained 1.34% a total of 1.406 points and is currently fixed at 106.315. Although dollar strength has been growing over the last two years recently dollar strength accelerated satrting in March when the Federal Reserve began to raise interest rates for the first time since 2018.

Since the March interest rate hike of ¼%, the Federal Reserve has raised its fed funds rates from near zero to 1.5% - 1.75%. Over the last three FOMC meetings the Federal Reserve has raised its fed funds rate first by 25 basis points in March, 50 basis points in May, and 75 basis points in June. It is also anticipated that the Federal Reserve will raise rates another 75 basis points during the FOMC meeting at the end of this month.

The rate hikes by the Federal Reserve have been in response to exceedingly high levels of inflation which continue to run at a 40-year high. The latest data from the U.S. government indicates that the CPI (Consumer Price Index) was at 8.3% in May. Just as alarming is the most recent economic data from Europe with the May 2022 Consumer Price Index for the Eurozone now fixed at 8.8% YoY.

KITCO