Gold prices fell to their lowest levels in more than two weeks Wednesday and saw some volatility after the Federal Reserve announced its first rate hike since 2018 to fight inflation. Analysts’ gold forecasts and market comments cryptocoin.com compiled for our readers.
Giles Coghlan: Fed confirms ‘temporary inflation’ era is over
Monetary policymakers led by Chairman Jerome Powell said they would raise the Fed benchmark rate by a quarter point to between 0.25% and 0.5%. They also prepared plans for continued increases in the Fed’s policy rate. HYCM principal analyst Giles Coghlan evaluates the developments as follows:
If there is any doubt, the Fed has confirmed that the period of ‘temporary inflation’ is over. Policymakers have chosen to embark on a long-awaited cycle of raising interest rates, despite the many ongoing uncertainties in the global economy. Going forward, more marching actions will come with caveats. We may see a more dovish approach to tightening rather than the aggressive approach we’ve been preparing for over the past year.
According to Giles Coghlan, traders and investors may see a ‘buy the rumor, sell the fact’ response to the announcement in favor of ‘equities rise, gold and silver gains, as well as the EUR/USD rising and US 10-year yields lower’.
Stephen Innes’ gold forecasts point to these levels
Earlier on Wednesday, ahead of the Fed decision, SPI Asset Management managing partner Stephen Innes noted that in the current interest rate environment, gold prices are only benefiting from safe-haven flows following the Russia-Ukraine war. Stephen Innes, on his gold forecasts, noted in a recent note:
When this support completely evaporates, gold loses a significant anchor. Gold is now likely to stay in the $1,850 to $1,950 range before dropping below $1,800 towards the end of the year, with the effects of higher commodity inflation.
Expectations for higher interest rates helped raise Treasury yields on Wednesday, with the 10-year bond yield rising 2.12% to nearly 2.24%, reducing demand for non-yielding precious metals. Gold, however, rose with the Eastern European crisis, but concerns over the corrosive effects of inflation also bolstered bullion purchases.
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