Gold is sitting comfortably above $1,950 an ounce with the price having perked up on the expectation that the Federal Reserve’s battle to curb high inflation is proving successful and the end of the bank’s series of interest rate hikes is drawing near.
The recent price action is curious with both equities and gold benefiting from the Fed’s interest rates peaking later in the year. Yet before any pause comes, another hike later this month seems almost certain with a high likelihood of a further increase in September.
The danger therefore is for gold that its buoyancy is based on a future scenario still a couple of months down the line and any changes to that trajectory could really cause the price to tumble.
The fact that gold was able to stay above $1,900 an ounce for so long before its recent climb back above $1,950 underlines the strength of underlying support there is for this safe haven asset with market confidence still fragile. Now with market confidence improving and equities gaining, the current gold price starts to look unsustainably high.
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