Fears over inflation are dominating market sentiment after a dramatic counter reaction to the Federal Reserve’s decision to increase its benchmark rate by 50 basis points.
Initially, investors looked to have viewed the Fed’s action favourably with equities rising but this was followed yesterday by a sharp reversal amid concerns that this wouldn’t be enough to tackle rising prices.
Live Gold Price - $/oz
Gold is struggling to gain traction in this environment of rising interest rates and now looks set for a sustained period below $1,900 an ounce. While the bullish support of the ongoing war in Ukraine will limit how far gold declines, this is currently outweighed by the bearish driver of central banks tightening their monetary policy making non-yield bearing assets such as gold less attractive.
It will be interesting to note the market reaction to the US jobs data due out later today with a lot of faith invested in these figures as a sign that the world’s largest economy is continuing to recover from the pandemic. In this jittery market environment, any indication that underperforms expectations is likely to spark further volatility.
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