Gold prices remained at their lowest levels in four months due to the fluctuating expectations in the core and headline inflation figures in the USA and the statements of the Federal Reserve officials that further interest rate hikes could be made. While the ounce of gold is at the level of 1.905 with a flat course, the decrease in the gold contracts for July and August is 0.20 percent. Gold for July delivery is trading at $1,904, while the August contract is at $1,913.
Brian Lan of GoldSilver Central, a Singapore-based international gold and silver trading company, told Reuters that the stronger dollar and recession He said that the prospects put pressure on gold.
Data released this week painted a picture of a resilient US economy, easing some concerns about an impending recession, while bolstering expectations that the Federal Reserve will continue to raise interest rates.
As Rate Increase Sounds Rising, Gold Falls
While gold is often seen as a lucrative investment in times of economic or financial uncertainty, rising interest rates reduce the attractiveness of non-yielding gold. Gold prices slumped under the lure of risk-free interest rates after Federal Reserve Chairman Jerome Powell said at a central bank meeting in Madrid that it is likely to raise rates at least two more times by the end of the year.
According to CME’s FedWatch tool, investors are currently seeing an 86.8% probability of a 25 basis point hike in July. It is a general judgment among investors that gold, which attracts as a ‘safe haven’ attraction in low interest rates and recession environments with high economic uncertainty, tends to decrease in times when the expectation of a rise in interest rates increases.
The strong expectation for an interest rate hike, as pointed out by FedWatch data, is putting negative pressure on both spot and forward gold prices.
The fact that the ounce of gold, which saw its peak of $ 2,060 after the ‘financial crisis’ that started with the bankruptcy of Silicon Valley Bank in the United States and started until the Swiss giant Credit Suisse, decreased by 8 percent from this peak to $ 1,905, in fact, the interest rate hikes are above gold prices. clear evidence of its impact. With the fears of bankruptcy, gold prices rising rapidly on the shoulders of the expectations that the Fed will stop interest rate hikes or even make a reduction, continue their decline from the summit with the effect of Powell’s showing 2 more interest rate hikes, which he held like a stick, under the table.
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