Equity markets look set to end the week on a downward note after Federal Reserve Chair Jerome Powell indicated that US interest rates could rise as much as 50 basis points in May and the central bank is “committed to using our tools to get 2% inflation back.”
This negative outlook for equities has given gold a small boost and pushed the price back above $1,950 an ounce. However, the Federal Reserve’s “front-end loading” of its implementation of measures to try and wrestle back under control will put gold under pressure in the medium term.
Live Gold Price Chart – $/g
Investors are now anticipating a half-point rate hike in both May and June with the likelihood of a third consecutive increase in July becoming ever stronger. In this environment of fast-rising interest rates, gold is likely to come under pressure as its lack of yield versus other asset classes reduces its appeal.
Gold’s upside and downside moves now look firmly capped with rising interest rates capping gold’s upward potential with the war in Ukraine, which looks to be worsening rather than any sign of peace in the short-term, providing a strong support. As such, gold is likely to trade in the $1,900 to $1,950 an ounce range over the medium term.
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
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