Gold is proving to be impressively resilient despite a reality check from Federal Reserve officials on the prospect of any pivot away from the bank’s series of interest rate hikes.
The fact that gold has been able to hold on to most of last week’s gains and continues to trade around $1,760 an ounce even with St. Louis Fed President James Bullard talking of the need to raise interest rates to at least 5% suggests that gold has built up sufficient support to now have a new trading level.
The fallout from crypto giant FTX’s collapse is clearly benefiting gold, with investors running away from an asset class that was previously seen as a potential haven to the time-proven safeguard of the precious metal. Gold’s role as a safe haven that has endured a range of financial crises and stock bubbles has come to the fore again.
December’s Fed meeting and decision on its interest rate is the next key set piece for gold to navigate. The expectation is that the US central bank will increase its benchmark rates by 50 basis points but while a move of that magnitude is likely priced in, what will be more significant is how steep the Fed sees its future interest rate curve climbing.
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