Gold prices have failed to revive in this morning’s trading, with investors awaiting the mood music from a key central bank summit later this week.
Persistent concerns about high inflation and a robust US dollar has weighed down the precious metal, easing from last month’s rally, raising the prospect of a further price slide.
While prices peaked at $1,988 per ounce on 20 July, they have since dropped nearly $100 to $1,889 per ounce – at a near five month low – with the safe haven asset struggling for backing amid expectations of further hikes from the Federal Reserve.
One further rate hike has been priced in, with analysts expecting the Fed will end its campaign of rate raises at the current range of 5.25 per cent to 5.5 per cent
However, there are concerns following last week’s publication of the minutes from the Federal Reserve Open Market Committee’s July meeting that the US central bank could implement multiple interest rate hikes.
Attention is now turning to the annual meeting this week in Jackson Hole, Wyoming, where Fed chair Jerome Powell is expected to make a speech on Friday outlining his views on the US economy.
Last year, he announced his hawkish strategy for combatting inflation with further interest rate hikes at the closely-followed symposium.
This has involved 10 interest rate rises since last March to tackle rampant inflation.
Rupert Rowling, market analyst at Kinesis Money argued that concerns over high inflation has a “doubly bearish impact on gold,” as the prospect of more hikes has “strengthened the US dollar and therefore reduced the value of any goods priced in the greenback, including gold.”
“Rising interest rates also reduce physical gold’s appeal as its lack of yield make other interest-bearing assets, such as bonds, more attractive instead, with US Treasuries making considerable gains on the expectation of higher-for-longer interest rates,” he said.
Edward Moya, senior market analyst at Oanda believed that future indicators for prices included China’s response to fresh economic turbulence and investor trading.
He said: “Gold traders will closely watch the annual Jackson Hole Symposium and how aggressive China becomes with providing support to the deepening property crisis. The global bond market selloff has sent gold prices sharply lower over the past month but that could stabilise if we get a dovish Fed Chair Powell and as long as China doesn’t disappoint with the next wave of stimulus.”