Gold has slipped closer to $1,900 an ounce as a busy period of central bank interest rate decisions looms. Tomorrow brings the latest move by the European Central Bank with investors increasing bets on the likelihood of another hike.
The ECB’s announcement will be followed by the Federal Reserve and the Bank of England among others next week and while lots more hikes are unlikely, central banks look set to adopt a “higher for longer” stance towards interest rates.
The prospect first of further interest rate hikes by potentially both the ECB and the Bank of England as well as rates staying above 5% for the foreseeable future on both sides of the Atlantic creates a challenging macroeconomic environment for gold and it now looks a matter of time before the price falls below the $1,900 an ounce threshold that the precious metal has traded above for the majority of the last six months.
Alongside high interest rates, which lessens gold’s appeal compared to interest-bearing asset classes such as bonds, the longer central banks look to have successfully balanced the twin challenge of reducing inflation without tipping their economies into recession, the more confidence will flow into equities markets and away from gold’s safe haven appeal.
The question now for gold investors is not whether the price will fall below $1,900 but how much further it will fall below that mark?
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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