Fed’s Expected Rate Hike Keeps Gold Under Pressure at Lowest Since Before Ukrainian War

All eyes are on the Federal Reserve today ahead of a near-certain hike in the interest rate by 50 basis points, which would be the largest increase since 2000.

As well as the confirmation of that move, investors will also be closely scrutinizing Fed Chair Jerome Powell’s comments in the press conference that will follow the Federal Open Market Committee’s rate decision to understand the trajectory of future interest rate moves as well as how fast the US central bank intends to reduce its balance sheet.

Live Gold Price – $/g

Indeed interest rate decisions will be a major focus for the rest of the week with the Bank of England expected to announce a further increase in its base rate tomorrow and recent comments from a European Central Bank board member pointing to an increase from the ECB in July. 

In such a hawkish environment gold has fallen out of favour among investors with the price languishing well below $1,900 an ounce at levels last seen in mid-February, prior to Russia’s invasion of Ukraine.

The outbreak of war triggered a rush to safe-haven assets such as gold but while there is no sign of an end to the fighting in Ukraine, by now investors have priced in the financial risks posed by the conflict and have reduced some of the fear-based trading as a result.

So with the factor that was emboldening such strong support for gold starting to weaken, the resistance posed by the series of interest rate hikes expected by the Federal Reserve over the course of the year has become the dominant driving factor for the precious metal.

While today’s Fed hike of 50 basis points is fully priced in, it would take a decision outside of this expectation to significantly move markets later today. For now, gold is left scrabbling for the next support to stave off further drops rather than any hope of it regaining the $1,900 threshold in the short 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.

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