Fed gold markets Gold price stacking up losses ahead of key Fed rate decision, analysts warn of $1,600 level
Precious metals are caving under the strength of the U.S. dollar and rising Treasury yields ahead of the critical interest rate decision by the Federal Reserve.
Markets stand ready to comb through the rate hike decision, updated economic projections, and the language Fed Chair Jerome Powell uses at the press conference following Wednesday's announcement. The predominant trend weighing on gold has been the expectations of an oversized 75-basis-point hike Wednesday, another 75 bps at the November meeting, and 50 bps at the December meeting.
"We now think USD strength will last longer than we had thought. Labour resilience means the Fed will have to hike further than the market is expecting. Deteriorating liquidity conditions and higher U.S. yields will feed haven flows and add risk premium," Hynes explained."Europe faces a serious energy crisis, which is a headwind for EUR and support for the USD. This makes us thinks the USD will peak in Q1 2023.
Volatility in gold is not going anywhere, added Moya."Prices will likely have a strong case for either a move towards $1,600 or above the $1,700 level," he said.