Islam Saeed wrote Thursday, September 21, 2023 02:26 PM I retreated gold prices Today, Thursday, for the third session in a row, in light of the rise in dollar levels and US bond yields following the Federal Reserve meeting yesterday, during which it indicated the possibility of raising interest rates again during 2023, it also reduced the chances of easing monetary policy and reducing interest rates in 2024.
Spot gold prices are trading today, Thursday, at the time of writing the Gold Billion technical report, at the level of $1,922 per ounce, down by 0.2%. This comes after it recorded the highest level since September 1 during yesterday’s session at $1,947 per ounce, before closing yesterday’s session down by 0.1%.
Gold prices rose yesterday, approaching the psychological resistance level of $1,950 per ounce, as soon as the Federal Reserve issued the decision to fix interest rates at the range between 5.25% – 5.50%, as was widely expected in the markets, before selling operations began to dominate the precious metal after the issuance of expectations. The Federal Reserve and Bank Chairman Jerome Powell’s speech at the press conference following the meeting.
The Fed showed that interest rates will remain at their high levels for a longer period of time, and forecasts indicated smaller rate cuts in 2024 compared to previous expectations, and the Fed Chairman warned that recent rises in inflation rates and labor market flexibility give the Fed more room to maintain interest rates. High.
Jerome Powell also indicated the possibility of raising interest rates again at least this year, taking a much more stringent tone than market expectations, as he reduced the possibility of a recession in the United States in light of the continued flexibility of the American economy, a scenario that heralds a weakness in demand for gold. As a safe haven.
Gold Billion expects that the possibility of US interest rates remaining high for a longer period will be the main pressure on gold in the coming months, given that higher interest rates lead to a higher opportunity cost of investing in non-yielding assets such as gold.
As for the expectations of members of the Federal Reserve Bank, known as the Dot Plot, which is conducted every 3 months, it indicated an increase in interest rates by 5.6% during the year 2023, which heralds a new increase in interest rates during the remainder of the current year.
He pointed out that the interest rate will decline to 5.1% in 2024, which is equivalent to only two interest cuts during 2024, after the markets were pricing in a 4-fold rate cut during the next year.
Gold is under pressure
The Gold Billion report stated that the rise in the dollar index, which measures its performance against a basket of 6 major currencies, during today’s session, Thursday, to record a new highest level in 6 months, breaching the 105 level, after it rose yesterday by 0.2%, creating more pressure on gold, as the yield rose. The yield on 10-year US government bonds reached the highest level since October 2007 at 4.448%, and the yield on two-year bonds rose to the highest level in 17 years at 5.202%.
The Federal Reserve’s confirmation of the continuation of the monetary tightening policy until reaching the 2% inflation target, which is expected to continue until 2026, in addition to Bank Chairman Powell’s indication of the possibility of raising interest rates again this year and reducing the chances of a rate cut in 2024, worked to support bond markets in a way. Large, which reflected positively on the return.
The rise in bond yields increases the attractiveness of bond markets to investors compared to gold, which does not provide a return to its holders. This is in addition to the rise in US dollar levels, which puts negative pressure on gold prices due to the inverse relationship that links them, since gold is a commodity priced in dollars.
2023-09-21 11:26:00
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