Posted 4th November 2022

Gold Shrugs Off Rate Hikes, Looks Set for Period of Sideways Trading

market analysis gold

Gold has shown little reaction to this week’s large interest rate increases by both the Federal Reserve and the Bank of England and continues to trade around $1,650 an ounce.

Both central banks increased their benchmark rate by 75 basis points as expected so with these moves long since priced in, it had little impact on the gold price other than keeping the pressure on any upside potential for the precious metal.

With this week’s interest rate increases having been implemented as expected, attention will quickly switch to what is in store for December and beyond. Gold enjoyed a brief rally in October on the prospect of November’s hike being the last big move by the Fed before its interest rate curve flattened out in 2023. However, Fed Chair Jerome Powell’s comments that followed Wednesday’s rate decision gave little indication of any immediate alteration of the bank’s aggressive stance in bringing down stubbornly high inflation.

The latest US unemployment figures due out later today will give further insight into the health of the world’s largest economy with the rate expected to remain at around 3.5%. With the jobs picture holding up well so far, this would give the Fed more breathing space to continue hiking rates without increasing the risk of tipping the economy into recession too greatly. 

Given the current macroeconomic backdrop, it will be difficult for gold to make any significant gains. Yet with Asian demand keeping the price supported when it dips towards $1,600 an ounce, gold looks set for a period of sideways trading around its current levels.

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