Volatility still haunts crypto, strengthens gold’s case

Dollar volatility keeps precious metals in focus

The dollar remained in focus on Wednesday as traders mulled the greenback's recent strength and what it could mean for precious metals.

The dollar index, which tracks the greenback against a basket of six major currencies, rose to 105.41 on Wednesday morning in New York. The dollar has been trading at elevated levels in recent months, as traders factor in the Federal Reserve's interest rate hikes and the U.S. economy's resilience.

The dollar's strength has come at the expense of other major currencies, such as the euro and the yen. The euro fell to a 10-month low of $0.9878 on Tuesday, while the yen hit a 15-month trough of 147.37 per dollar.

The dollar's volatility has also kept precious metals traders on their toes. Gold futures fell to a seven-month low on Monday, as the dollar's surge and a lack of demand from top consumer China weighed on prices.

Gold is typically seen as a hedge against inflation and currency volatility, but it can also be affected by changes in interest rates and economic growth.

The Federal Reserve is expected to keep interest rates high for some time yet, which could continue to weigh on gold prices. Higher rates tend to dampen demand for the non-interest-bearing yellow metal, while also boosting the dollar.

Despite the recent declines, some analysts believe that gold could still rise in the long term, especially if the dollar begins to weaken.

"The dollar's advance may be nearing its peak, which would favor gold in the second half of the year," Masahiro Koga, senior market economist at大和証券said.

The dollar's volatility is also likely to depend on the upcoming U.S. economic reports, which could provide further clues about the health of the world's largest economy. Any signs of weakness in the U.S. economy could lead to a pullback in the dollar, which in turn could support gold prices.