Posted 27th May 2022

Gold Set To Post 2nd Weekly Gain in a Row on Weaker Dollar, Prospect of Fewer Rate Hikes

kinesis gold bullion stack

Gold looks set to post its second consecutive weekly gain as a slight weakening in the strength of the US dollar allied to a broader reevaluation of prices following the brutal sell-off earlier in the month has brought some relief to markets. 

The publication of the minutes from the Federal Open Market Committee showed that while rate hikes in June and July by the US central bank are near-certain, there is more flexibility on future moves. 

Live Gold Price – $/oz

The likelihood of a series of interest rate increases was the main trigger for gold’s plunge earlier in the month, with it even dipping below $1,800 an ounce at one point. However, the prospect of monetary policy not being as hawkish as first feared has allowed gold to regain some of the ground it lost with it now trading above $1,850 an ounce.

With inflation remaining an acute concern for markets, gold finds itself trapped between two competing forces. On the one hand, gold is a proven holder of its value over centuries so periods of high inflation make it an attractive asset to hold. On the other hand, the policies adopted by central banks on both sides of the Atlantic to try and curb rising prices, namely hiking interest rates, reduces gold’s appeal versus other assets that provide a yield.

In this climate, gold looks now to have found its true level and is likely to oscillate around the $1,840-$1,860 an ounce range until there is a fresh catalyst.

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