Gold continues to languish near its lowest level in more than two years following a week in which both the Federal Reserve and the Bank of England implemented further large interest rate hikes.
The pressure gold is coming under in the current macroeconomic environment, with interest rates going up across the world and likely to continue doing so for a number of months yet, means it is hard to see how the metal can make gains with the question more about how low it will go.
The glimmer of hope for gold investors is that while the price is at levels last seen in March 2020, it hasn’t dropped that much this week even with the central bank announcements, suggesting that the rate hike trajectory is priced in to gold’s lowly price.
The main supportive factor remains the war in Ukraine with Russian President Vladimir Putin’s recent rhetoric hinting at the potential use of nuclear weapons. With this week’s announcements already old news for the markets, the focus switches to what the central banks will do next with next week’s slew of inflation data likely to be highly instructive in determining their approach and whether even more aggressive hikes are needed to tame the fast pace at which consumer prices are rising. If these bring more high prints, then this would exacerbate the downward pressure on gold with banks likelier to implement even larger hikes as a result.
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