Gold Price Slips, Near Week Low

Gold Price Slips, Near Week Low

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Gold prices fell more than 1 percent, near a one-week low on Tuesday. This comes after US Federal Reserve Chairman Jerome Powell signaled a big interest rate hike this year to curb soaring inflation.

Gold is very sensitive to rising US interest rates, as they increase the opportunity cost of holding non-yielding bullion.

Quoted from the CNBC page, the price of gold in the spot market fell 0.73 percent to USD 1,921.82 per ounce.

US gold futures slipped 0.4 percent to $1,924.8.

“The fact that the Fed is poised to make a half-point gain versus a quarter-point move forward is all quite hawkish and has pushed gold lower,” said RJO Futures senior market strategist Bob Haberkorn.

“Comments like that would normally send gold significantly lower, such as a $50 drop, but the fact that the Russia-Ukraine situation is at the forefront keeps gold prices up,” he said.

Powell said on Monday that policymakers need to move “fast” as inflation heats up, and he raised the odds of a 50 basis point (bps) increase.

Market Reaction

Gold Price Slips, Near Week Low

Powell’s hawkish stance triggered a sharp bond market sell-off and sent the benchmark 10-year yield to its highest since May 2019.

Traders now expect a 50 bps rate hike at the Fed’s next meeting in May. Last week, the Fed raised interest rates by 25 bps for the first time in three years.

Nonetheless, pressure on gold was relatively muted as investor focus was on the Ukraine conflict, with any major development likely to trigger a sharp price swing, analysts said.

The increasing holdings of gold exchange-traded funds suggest that despite daily price fluctuations, asset managers are moving back to gold to diversify and as a hedge against inflation and economic downturn, said Saxo Bank analyst Ole Hansen.

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