Gold Slips In the Shadow of Potential Rate Hikes

Gold futures took a dip this week with pressures from the US Treasury yield continue to surmount.  Apparently, risk has also increased and that has led to the Federal Reserve tightening its grip, causing the drag.

Specifically, spot gold fell by 0.6 percent on Thursday, to a value of $1,946.73 per ounce. This is the lowest value spot gold has hit since April 8.  By the end of the day, US gold futures had regained some ground to settle still down by 0.4 percent, at $1,948.20.

Apparently, gold is on a corrective path.  Analysts are saying that a half-percentage-point rate hike is all the market needs for a complete and solid response to inflation.  In addition, it seems the Fed is more likely to issue an aggressive rate hike in the months to come; at least as long as yields are high.

According to US Federal Reserve Chair Jerome Powell, “Inflation is much higher now and our policy rate is still more accommodative than it was then so it is appropriate, in my view, to be moving a little bit more quickly.”  He notes that the half-percentage-point interest rate will remain “on the table” for the time being.

Furthermore, although gold is generally held as a safeguard against rising inflation pressures, these quickly growing interest rates could introduce higher opportunity cost in non-yielding bullion.

As such, US 10-year Treasury yields inched up to surpass the three-year peak, in the middle of the week, as many bond markets took sharp hits in a sell-off.

Earlier this week, gold futures rallied to hedge closer to $2,000 as concerns over the Russia-Ukraine conflict continue to grow.  Similarly, the aforementioned inflation worries have sparked a demand for more safe-haven efforts.

Accordingly gold is now consolidating in the $1,940 to $1,960 per ounce range.  Beyond that, experts advise that it might also be able to get some support at the $1,915 to $1,930 range.