The hawkish US Federal Reserve’s response to soaring inflation and the strengthening of the US dollar continue to weigh down gold prices, despite market volatility traditionally benefitting the safe-haven asset.
The precious metal is currently trading at $1,807 per ounce, having dropped over $40 in the past month, as the Fed’s switch in monetary policy begins to take shape and downgrade investor confidence.
The dollar is also likely to be further bolstered by another large interest rate hike expected at the end of this month – which could be as much as 75 basis points.
This would take interest rates to a hefty 2.25-2.5 per cent.
Rupert Rowling, Market Analyst at Kinesis Money said: “In this environment of ever rising interest rates, it is hard to see gold making significant gains but if the precious metal can hold above $1,800 an ounce, then it would demonstrate that there remains significant underlying support for gold. Which given the ongoing jitters with market confidence amid fears of a recession as well as a war in Ukraine, is entirely understandable. “
Clarity on the Fed’s position is expected to come later this week with the release of minutes from the Federal Open Market Committee.
Meanwhile, silver’s struggles have shown no sign of easing any time soon with the metal trading below $20 an ounce, near its lowest level in two years.