Gold is at week-low as Fed on hawkish overdrive
Updated
On Thursday, the price of gold dropped to its lowest level in a week. This decline followed the Federal Reserve's commitment to raising interest rates until annual inflation reaches its 2% target. Market experts believe this could lead to further decreases in the value of gold.
The most actively traded gold futures contract on the New York Comex exchange, set for delivery in December, fell by $27.50, or 1.4%, closing at $1,939.60 per ounce.
At 3:30 PM ET (7:30 PM GMT), the spot price of gold stood at $1,920.82. Spot gold, which is determined by real-time trades in physical gold and closely monitored by some traders, fell by $9.66, or 0.5%, for the day.
On Wednesday, spot gold briefly touched $1,947.80 but couldn't break through the $1,950 resistance level.
According to Sunil Kumar Dixit, the chief technical strategist at SKCharting.com, "Once again, $1,950 proves to be the bar for spot gold to beat. If spot gold regains strength above $1,950, it may rise towards $1,980. If it falls below $1,924, sellers will aim to push it down to $1,900 and possibly even $1,885."
Gold's decline was triggered by the 10-year U.S. Treasury yield hitting an intraday high of 4.495%, its highest level since 2007. This indicates a significant selloff in the bond market. Additionally, the Dollar Index reached a six-month high, which reduced demand for dollar-denominated commodities among holders of other currencies.
Ed Moya, an analyst at the online trading platform OANDA, stated, "Gold is particularly sensitive to a hawkish Federal Reserve, which is contributing to the bond market selloff."
The Federal Reserve projected another quarter-point rate hike by the end of the year, despite leaving rates unchanged at its September policy meeting. Fed Chairman Jerome Powell said, "We are prepared to raise rates further if appropriate. Keeping rates steady at this meeting doesn't mean we have decided on our final stance of monetary policy."
Between February 2022 and July 2023, the Fed increased interest rates 11 times, raising them by a total of 5.25 percentage points from a base rate of 0.25%. The central bank predicts that U.S. rates will remain around 5.1% through 2024.
Ed Moya added, "Europe may have finished tightening its monetary policy, but in the U.S., higher interest rates are expected to persist. This could lead to one more round of weakness for gold as U.S. economic strength continues to push yields higher. While the peak in Treasury yields may be near, gold might struggle to stabilize until recession risks become a more prevalent concern in the U.S."
The most actively traded gold futures contract on the New York Comex exchange, set for delivery in December, fell by $27.50, or 1.4%, closing at $1,939.60 per ounce.
At 3:30 PM ET (7:30 PM GMT), the spot price of gold stood at $1,920.82. Spot gold, which is determined by real-time trades in physical gold and closely monitored by some traders, fell by $9.66, or 0.5%, for the day.
On Wednesday, spot gold briefly touched $1,947.80 but couldn't break through the $1,950 resistance level.
According to Sunil Kumar Dixit, the chief technical strategist at SKCharting.com, "Once again, $1,950 proves to be the bar for spot gold to beat. If spot gold regains strength above $1,950, it may rise towards $1,980. If it falls below $1,924, sellers will aim to push it down to $1,900 and possibly even $1,885."
Gold's decline was triggered by the 10-year U.S. Treasury yield hitting an intraday high of 4.495%, its highest level since 2007. This indicates a significant selloff in the bond market. Additionally, the Dollar Index reached a six-month high, which reduced demand for dollar-denominated commodities among holders of other currencies.
Ed Moya, an analyst at the online trading platform OANDA, stated, "Gold is particularly sensitive to a hawkish Federal Reserve, which is contributing to the bond market selloff."
The Federal Reserve projected another quarter-point rate hike by the end of the year, despite leaving rates unchanged at its September policy meeting. Fed Chairman Jerome Powell said, "We are prepared to raise rates further if appropriate. Keeping rates steady at this meeting doesn't mean we have decided on our final stance of monetary policy."
Between February 2022 and July 2023, the Fed increased interest rates 11 times, raising them by a total of 5.25 percentage points from a base rate of 0.25%. The central bank predicts that U.S. rates will remain around 5.1% through 2024.
Ed Moya added, "Europe may have finished tightening its monetary policy, but in the U.S., higher interest rates are expected to persist. This could lead to one more round of weakness for gold as U.S. economic strength continues to push yields higher. While the peak in Treasury yields may be near, gold might struggle to stabilize until recession risks become a more prevalent concern in the U.S."
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