Posted 10th June 2022

Gold Shrugs Off Prospect of ECB Rate Hikes to Continue to Trade Around $1,850

gold bullion bar stack

For the first time in over a decade, the ECB interest rates will finally rise in July, most likely by 0.25%.

In yesterday’s meeting, Christine Lagarde confirmed that the ECB will stop bond purchases and is ready to hike rates. Moreover, this will be the first step in a series of moves that could bring rates in the region of 1% by the end of the year. Investors are also speculating about the possibility of a 50 basis point move in September.

Live Gold Price – $/oz

Stock markets reacted, extending their losses, with the European indices losing around 2% with this bearish outlook continuing today. The euro surprisingly slowed down, while European bonds yields jumped. Particularly, we have noticed an increase of the spread between the German government bonds (10y Bund) and the bonds of other countries such as Italy and Spain.

Gold had a more muted reaction with the price of bullion remaining close to $1,850 and above the first support zones of $1,830 and $1,840. Despite expectations for rising interest rates, investors are still willing to hold bullion in their portfolio in this very uncertain phase.

From a technical point of view, gold is just above the support zone of $1,840, while another interesting area will be $1,830. Of course, the $1,790-$1,800 zone remains a crucial support, but it is still far away. On the positive side, a clear surpass of $1,865 would increase chances of seeing a new rebound to $1,900 with the next market driver is the U.S. CPI, which will be released later today.

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