Gold prices boosted gains on Thursday after Federal Reserve Chairman Jerome Powell’s comments on future rate hikes sounded less hawkish than feared, pushing the dollar and US Treasury bond yields down. So what’s next? Here are the expectations of the experts for the precious metal…
What’s next for gold prices?
Spot gold continued to bounce after hitting a two-week high, up 1 percent in the previous session. cryptocoin.com As we reported, the US central bank increased rates by three-quarters on Wednesday to combat rising inflation. Powell said at the September meeting that an “unusually large” increase in interest rates might be more appropriate. However, he said the decision will be determined by incoming economic data and will not provide any forward-looking guidance. Edward Meir, ED&F Man Capital Markets analyst, used the following statements:
Powell left the door slightly open for a review of the interest rate situation. It provided a kind of light at the end of the tunnel that we will see increasing rates will not happen next year either. That lowered the dollar, and US yields caused the flurry we’ve seen in gold. In the near term, gold prices are likely to rise further next month with a chance to test resistance between $1,780 and $1,800.
The dollar fell 0.6 percent overnight and fell near a three-week low on Thursday. It made dollar-denominated gold cheaper for other currency holders. Benchmark US Treasury yields fell close to two-month lows. Lower bond yields lower the opportunity cost of holding interest-free gold. Meanwhile, the World Gold Council said the sharp decline in investor purchases drove global gold demand down 8 percent in the second quarter from the same period in 2021.
Expert: A positive environment for the gold market
cryptocoin.com As we have also reported, Fed Chairman Jerome Powell mentioned that there is no clear visibility into the future trajectory of the economy. He said this means that the central bank can only provide reliable guidance on where its policy is going on a “meeting basis”. David Meger, director of metals trading at High Ridge Futures, said:
If the market now believes that interest rates won’t move that high and not that fast, that’s a relatively positive environment for the gold market to move forward, and that’s why we’re seeing positive movement after the Fed meeting.
Standard Chartered analyst Suki Cooper said, “However, market prices raise expectations for the September FOMC meeting. Market prices continue to take a cue from the US dollar during a seasonally slow demand period. Therefore, the gold price risks look to the downside,” he said. Interest rate hikes to combat rising inflation tend to increase the opportunity cost of holding non-interest-bearing bullion. The Fed’s aggressive rate hikes and the dollar’s recent rally have overshadowed bullion’s appeal as a safe-haven, despite recent recession risks.
