In a report by MarketWatch, if the financial markets are correct in their prediction that the Federal Reserve will continue its interest rate hikes into summer, then gold prices will proceed to decline.
Prices were already at their lowest in the last week of February than they’ve been since January. They continued to fall in electronic trading after the Fed’s February 1st meeting minutes were released, a half hour after gold futures settled for the session.
At the meeting, the Fed raised interest rates by 25-basis-points, or a quarter point, bringing its policy rate target to a range of 4.5% to 4.75%.
Chintan Karnani, Director of Research at Insignia Consultants, affirmed with MarketWatch that gold has fallen due to the expectation of a rising interest rate trend until June or July.
According to the minutes in the February 1st meeting, some advocated for a 50-basis-point hike. “There’s been some talk that policy makers are looking to return to 50-basis-point rate hikes again,” Fawad Razaqzada, a market analyst at City Index and FOREX.com, said in commentary ahead of the Fed minutes. But he didn’t expect that to happen, “as the Fed has already tightened its policy aggressively and will now go in with smaller increments so as to avoid an unwanted hard landing.”
But because the Fed wants to “keep its contractionary monetary policy in place longer than they had expected at the back end of last year and start of this year, owing to further improvement in U.S. data and sticky inflation,” said Razaqzada, the dollar has found good support and that’s a “major factor weighing on buck-denominated gold.”