All Eyes on Fed for Gold Holders With Question Not If But How Much Bank Will Hike Rates

Today sees the Federal Reserve announce its latest interest rate decision with the US central bank expected to raise its benchmark rate for a third consecutive month.

While another hike is near certain, the crucial question is by how much. Will they keep within the 50 basis point moves seen so far or will the Fed decide they need to act faster to tackle inflation and raise the rate by 75 basis points?

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The prospect and indeed reality of a series of interest rate increases by central banks on both sides of the Atlantic has been the major drag on the price of gold in recent months. Having initially looked to be trading in a narrow $1,840 to $1,860 an ounce, the price of gold sunk earlier in the week on fears central banks may have to move faster and harder with rate hikes to bring persistently high inflation under control.

So far today gold is making tentative gains to be trading at around $1,820 an ounce and can be expected to hold onto those gains if the Fed keeps its hike within the 50 basis point move that has been priced in. Any move that exceeds that will cause gold to fall again while in the unlikely event of a smaller increase or indeed no hike at all, gold will be a beneficiary.

Should a 75 basis point move land, then gold investors will be hoping that the psychologically important threshold of $1,800 an ounce holds firm as a failure to keep above that level would leave them looking frantically downwards fearing where the next support lies.

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.