Any hopes of sufficient support to keep gold above $1,700 an ounce have been well and truly dashed with the precious metal ending the week by falling to its lowest level in more than two years.
Next week the Federal Reserve is certain to implement another large rate hike, almost certainly of 75 basis points. Still, with inflation remaining high there is a small chance the bank may increase its benchmark rate by a full percentage point.
In such a hawkish environment, with central banks across the world set on policies that have already seen them hike rates significantly and are likely to continue for a number of months yet, gold’s appeal has dwindled significantly. Its lack of yield makes other interest-bearing assets far more attractive and after failing to hold on to the key threshold of $1,700 an ounce, the metal is now looking like a boat being pushed out by the tide without an oar to try and correct itself.
Furthermore, positive signs of Ukrainian regaining territory taken by the invading Russians has been warmly welcomed by the world but is another negative factor for gold with the metal having built up some safe-haven support on the back of the conflict.
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