Gold continues to trade above $1,950 an ounce as traders and investors brace themselves for a busy week filled with interest rate decisions by central banks across the world, including the US Federal Reserve’s much-anticipated announcement on Wednesday.
While the prevailing view remains that the Fed will pause on further interest rate hikes when the committee meets later this week, stubbornly high inflation allied to a strong US jobs market means a surprise increase can’t be fully ruled out. As such the gold price is trading on the assumption that US interest rates will stay where they are with any hike likely to send the precious metal crashing down towards $1,900 an ounce.
Recent surprise hikes from the Bank of Canada and the Reserve Bank of Australia have reminded investors that a Fed pause is not a foregone conclusion with all markets trading cagily as a result before confirmation arrives on Wednesday.
Assuming a pause is indeed confirmed, then gold is likely to stay where it is with the current price already reflecting this light relief to an asset that typically struggles in times of rising interest rates. However, while a pause will be positive in the short-term for gold, the medium-term outlook is less promising as a resurgent stock market freed from the shackles of a hawkish Fed may see investors allocate more funds to risk assets such as equities and dwindle gold’s safe-haven appeal.
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 greenwash while investing sustainably.
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