Gold prices fell to a nearly a year low on Thursday as major central banks expected further rate hikes to combat rising inflation.
Ilya Spivak: Aggressive tightening undermines the lure of gold
Gold is accepted as a measure against inflation. However, rising interest rates increase the opportunity cost of holding non-interest-paying bullion. Spot gold fell to $1,689.40 at the start of the session, its lowest level since early August 2021. Extending its decline later, the yellow metal was trading at $1,683.71 at press time. U.S. gold futures slid 1.05% to $1,682.4. DailyFX currency strategist Ilya Spivak comments:
Clearly, inflation expectations are falling. Because the Fed and other central banks are embarking on an aggressive tightening regime that undermines gold’s appeal.
ANZ: Gold fell below $1,700 for this reason
The European Central Bank is set to raise interest rates for the first time in 11 years on Thursday. Policymakers fear losing control of runaway consumer price growth. So a larger move than marked becomes more and more likely. cryptocoin.com As you follow, the markets expect the Fed to raise interest rates by 75 basis points at its policy meeting next week. Meanwhile, British inflation rose to a 40-year high in June. This increased the chances of the Bank of England’s rate hike by half a percentage point next month. In a note, ANZ analysts comment:
Investors continue to reduce risks to the sector ahead of central bank meetings. Therefore, gold fell below $1,700.
Daniel Ghali: Gold still failed to rise because…
The holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, are seen as indicators of sentiment. SPDR holdings fell 0.3% to 1,005.87 tonnes on Wednesday. This is the lowest level it has seen since January.
On the other hand, the US dollar lost 0.3% against its rivals. This, in turn, helped gold limit its losses. A weaker dollar makes gold cheaper for holders of other currencies. Daniel Ghali, commodity strategist at TD Securities, has this to say about the latest developments:
The yellow metal is trading in a narrow range. However, it is heavily traded. Fed speakers pushed back the idea of a 100 basis point increase. However, gold still failed to rise. Because there are traders who take the chance to sell before prices drop further.
“Şahinci central bank regime reduces appetite for gold purchases”
Market expectations for the Fed’s 100 basis point rate hike decreased. So the yellow metal has started the week on a somewhat positive note. Recently, however, investors preferred the dollar. Because of this, the precious metal failed to attract many safe-haven flows. Daniel Ghali says:
The conflict in Ukraine catalyzed large inflows into gold ETFs earlier in the year. However, its significance has declined. The Şahinci central bank regime is reducing its appetite for gold purchases.
David Jones: Attractive position for gold traders in this range
Commenting on the markets, David Jones, chief market strategist at Capital, comments:
The attractive position for gold traders at the moment seems to be to position themselves for a recovery between $1,650 and $1,700. This range looks like a good mid-term base.
Lukman Otunuga: Bears are clearly roaming around
Lukman Otunuga, executive and market analyst at FXTM, addresses the weakness in the dollar. He notes that this helps the precious metals breathe a little. However, the analyst notes that bears are also around. In this context, Otunuga says:
A softer dollar gave the precious metals some breathing room earlier in the week. But bears are clearly roaming around. Gold is likely to pierce a new directional catalyst below the $1,700 psychological support.
