Gold prices fell on Wednesday as the US dollar strengthened. Meanwhile, investors await the minutes of the Fed’s latest policy meeting, which may hint at further rate hikes. Analysts interpret the market and share their forecasts.
Ilya Spivak: This will be negative for gold prices
Spot gold prices hit $1,764.59 on Wednesday, their lowest level since Aug. After recovering somewhat, the yellow metal fell 0.32% at $1,770 at the time of writing. U.S. gold futures were last traded at $1,785.7, up 0.23%. Ilya Spivak, currency strategist at DailyFX, comments:
The focus is on the July Federal Open Market Committee (FOMC) meeting and the minutes of the August 25-27 Jackson Hole Symposium. Both of these events will set the stage for the Fed meeting in September. If we get a more hawkish view on rate hikes from the Fed, it will be somewhat negative for gold in terms of its core appeal for investors.
SPDR Gold Trust’s holdings fell
Meanwhile, the Fed will release the minutes of its July 26-27 policy meeting today. The Fed has been raising interest rates since March to rein in high inflation. In this process, the benchmark increased the overnight interest rate by a total of 225 basis points. Traders are pricing in a 42.5% probability of a 75 basis point rate hike at the Fed’s next meeting in September. On the other hand, they give a 57.5% chance of a 50 basis point increase.
There are signs that inflation is easing in the world’s largest economy. Despite this, Fed officials displayed a hawkish tone in future rate hikes. This caused gold prices to pull back from the key $1,800 level. Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.18 percent to 992.20 tons on Tuesday. Thus, it marked its lowest level since January.
Edward Moya: Minutes will put pressure on gold prices
Commenting on the market developments, OANDA senior analyst Edward Moya says:
Dollar continues to gain value ahead of Fed minutes. Gold prices are facing some depletion. The gold market will be very volatile until the Fed meeting in September. The minutes will likely confirm the belief that aggressive rate hikes are still on the table. This will support the dollar and potentially put downward pressure on gold.
Standard Chartered: Downside limited for gold prices
cryptocoin.comAs you follow on , several Fed officials have recently highlighted the need to continue raising interest rates to combat persistent inflation. Gold is considered an inflation hedge. However, higher interest rates make the non-yielding asset less attractive.
Bank of China International analyst Xiao Fu notes that investors have withdrawn from funds traded on the gold exchange. Fu says this is also possible to put pressure on gold. However, Standard Chartered said in a note that “gold’s downside may be limited despite aggressive rate hikes as recession risk rises.”
Craig Erlam: Gold will have to get over it
Gold prices softened this week. The yellow metal later declined below the key $1,800 level. It’s also halfway through capturing the longest weekly earnings streak since December. Craig Erlam, senior market strategist at OANDA, comments:
It is possible that gold has not lost much of its recent gains, which is a positive sign in the medium term. But what became a strong resistance barrier last week will have to overcome.
Peter Grant: This is where the Fed can get into trouble!
Meanwhile, expectations for the Fed’s rate hike for September turned in favor of a “less aggressive” 50 basis point hike. Peter Grant, vice president and senior metal strategist at Zaner Metals LLC and Tornado Precious Metals Solutions, comments:
But I’m not convinced this will limit the dollar, especially if the dollar brings additional safe-haven interest. This is where any disbelief that we are already in recession can get the Fed in trouble. We’ll see the minutes of the July Fed meeting on Wednesday.
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