Drop on Equity Markets Fails to Boost Gold as Fed Outlook Continues to Weigh on Price

Markets have started the week on a negative tone after being rattled by concerns that the ongoing lockdown in China, as the country seeks to control its latest wave of coronavirus, will have a significant impact on global growth and supply chains. 

Equity indices across the world are a sea of red given these worries over the growth outlook for the world’s second largest economy and a key supply hub for so many of our everyday items.

Yet while negative moves on equity markets are typically met with the reverse reaction on gold, the precious metal also finds itself being pulled downward to be trading a little above $1,900 an ounce at its lowest level for about three weeks.

Live Gold Price Chart – $/g

Gold’s inability to benefit from falling stock markets is a reflection of how difficult it will be for gold to make significant gains given the interest rate outlook outlined by the Federal Reserve last week.

With hikes by the US central bank now all but guaranteed in both May and June and highly likely in July too, this has given support to the US dollar and made gold a much less attractive asset to hold given its lack of yield. 

Finally, Emmanuel Macron’s victory in the French presidential election has taken one big potential risk to markets off the table with his pro-European, pro-business outlook a positive for markets while a win for his rival Marie Le Pen could have seen a rush to gold with investors fearing the consequences of a right-wing takeover of one of Europe’s largest economies.

Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. 

As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwashing while investing sustainably.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis