On the last trading day of July, gold looks set to end a challenging month on a positive note as signs that the Federal Reserve may be less aggressive with its future interest rate hikes have allowed the precious metal to recover some of the month’s losses.
While the US central bank did confirm market expectations with another 75 basis points increase in its benchmark rate earlier in the week, some of the rhetoric that supported the announcement was interpreted as the Fed being less likely to make such large moves going forward.
The fact that gold has been able to gain so much since the Fed’s announcement, with the price gaining about $40 an ounce to around $1,760, shows there is still significant support for the haven asset as talk of a recession in the US and other countries intensifies.
How much further gold can recover will largely be determined by the same two factors that pushed it down earlier in the month: the strength of the US dollar and the actions of the Fed, both in terms of comments by central bank officials and the actual interest rate moves themselves.
With markets still remaining very jittery, it has often been words that have spooked or emboldened investors and traders, more so than the final action which has often been priced in by the time the move arrives.
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