Gold prices slipped back from a four-month high last week – closing the curtain on a 10-day rebound which has seen the precious metal gain over $150 per ounce in value.
Prices peaked at $1,774 per ounce last Friday, recovering from a two-month low of $1,618 per ounce.
The precious metal has since retreated to $1,771 per ounce following comments from US central bank policymakers that more interest-rate hikes were on the way.
Federal Reserve (the Fed) Governor Christopher Waller argued the US economy had “a ways to go” before ending interest-rate hikes.
Nevertheless, prices have remained elevated amid growing expectations of a softer policy towards interest rates from the US central bank – with less dramatic hikes expected in the future.
With interest rates currently at 3.75-4 per cent, there is increased optimism interventions will peak next at 4.5-4.75 per cent next year, in line with Federal Reserve projections.
Gold typically enjoys a close relationship with the performance of the dollar, with the resurgent currency weighing down prices from the $2,039 per year peak following Russia’s invasion of Ukraine.
The dollar’s strengthening over the summer months saw prices slide as low as $1,615 per ounce in late September, before the the more recent uptick in performance.
Despite a more optimistic sentiment towards gold, interests rates are unlikely to dip or even plateau in the short-term – with the Fed eager to tame rising consumer prices.
Rupert Rowling, market analyst at Kinesis Money argued the recent surge is unlikely to be sustained – with profit-taking likely as investors wait for the true value of the precious metal to emerge.
He did not expect the current rally to be sustained, even with a more encouraging stance from the Fed.
Forecasting the future, he said: “Taking all these factors into consideration, gold’s current price looks dangerously high and it would only take a slight shift in sentiment on where the Fed will go with its December rate move for the price to come quickly crashing back to $1,700 an ounce.”