Gold continues to be under strong downward pressure after Federal Reserve Bank of Philadelphia President Patrick Harker became the latest senior Fed official to state the need for interest rates to climb significantly.
Harker reiterated the need for interest rates to climb to “well above 4% by the end of the year” with the officials at the US central bank all seemingly aligned on the need to continue their aggressively hawkish stance to bring inflation back under control.
In such an environment, it is hard for gold to gain any traction with even the chaotic scenes in the UK with Liz Truss’ sudden departure as Prime Minister failing to give the price a boost. In fact, rather than the uncertainty caused by a change of leadership resulting in a boost for haven assets, such as gold, the markets responded positively initially with the view that a new leader couldn’t be any worse than Truss’ disastrous 44-day tenure.
As gold drifts towards $1,600 an ounce, its reaction as it nears that significant threshold will be key in determining the strength of the support that remains for the precious metal. Given that Asian demand has picked up with buyers taking advantage of the cheaper prices, it is likely that gold may find sufficient support to hold above $1,600. However, any hopes of climbing back towards $1,700 an ounce look remote in the current environment.
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