Gold price may dip with Fed rate hike
Markets increasingly anticipate the Federal Reserve will hike US interest rates by 0.25% this week, potentially pressuring the global gold price to slide by as much as US$100 an ounce, say pundits.
Gold prices slipped below $4,300 on Wednesday as U.S. interest rates climbed, with investors awaiting the Federal Reserve's decision later in the day. The precious metal faced selling pressure due to surging oil prices and concerns over inflation, which heightened expectations of a possible Fed rate hike. In response, the benchmark 10-year U.S. Treasury yield reached its highest level since 2007 at 5.041%.
Higher yields increase the opportunity cost of holding non-yielding gold, putting downward pressure on its price. Analysts noted that gold currently trades within a narrow range, with a potential for further decline if interest rates continue to rise. Earlier in the week, oil prices surged after Saudi Arabia closed a key pipeline bypassing the Strait of Hormuz.
If the U.S. Federal Reserve raises interest rates by 25 basis points to the 3.75%-4.00% range, analysts predict a near 92.4% chance of a rate increase during the September policy meeting. Lower interest rates typically boost gold's appeal, as it does not pay interest, making yield-bearing assets comparatively more attractive.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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