Gold is set for a sizable weekly loss as the price drifts down towards $1,900 an ounce.
Yesterday’s surprisingly large interest rate hike by the Bank of England highlighted how much stubbornly high inflation is still affecting economies and increased the likelihood of a recession.
This outsize move by the Bank of England follows similarly hawkish moves by the central banks of Canada and Australia earlier in the month and has added to pressure on gold, with its lack of yield making it less attractive to investors at times of rising interest rates. While this lack of yield faces traditional bullion investment, gold-backed digital assets such as gold KAU offer investors a monthly yield, simply for holding their gold in a Kinesis account.
This pressure from rising rates has more than offset what gold may have benefited from as the investor mood shifts to a more risk-averse position on the prospect of various economies tipping into recession in the coming months.
Where gold goes from here will largely depend on how bad the negative outlook actually proves and whether economies can remain resilient in the face of high-interest rates. If they do, then gold will continue to drift lower, particularly if $1,900 an ounce fails to prove significant support to the price.
If however, recession fears do prove accurate then gold’s haven appeal will shine brightly and may keep it above $1,900 for a while longer yet.
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