Gold is holding at around $1,915 an ounce after yesterday’s drop as sentiment turned more optimistic on equities markets.
This week has been filled with interest rate decisions from central banks, with the Federal Reserve, the Bank of England and the European Central Bank all hiking their benchmark rates in line with market expectations. As such, the position for gold is little changed from where it was at the start of the week with the expected moves by these three major central banks long since priced in.
The main driver on markets this week was not the moves themselves but the commentaries that supported them with traders extrapolating from the remarks of the central bankers that the end to the rate hike cycle is drawing near, even though all three banks were at pains to reiterate that more hikes are still needed. Gold was a casualty in the short-term with investors piling into equities in this more optimistic environment but is still likely to be a beneficiary in the medium-term given that gold with its lack of yield is less attractive at times of rising interest rates.
Later today brings the next key data point with the release of the latest US jobs data. With US inflation now clearly having peaked, investors will want to see that the world’s largest economy remains in good health to enable the Fed to remain less aggressive at its next interest rate meeting. For now, gold has survived the main threat to maintaining its elevated price but will need the data to keep on supporting it for the on the ground reality to catch up with a price that is reflective of a period sometime in the future.
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