Gold clings to its features as a haven after Powell’s hawkish speech

The value of gold held onto its current features as buying and selling started on Thursday at $1,976 per ounce after the Federal Reserve’s resolution yesterday, which was solely consistent with expectations, to lift rates of interest by 25 foundation factors.

Nevertheless, throughout Powell’s press convention following the assembly, his tone was extra hawkish and diverged from expectations, particularly when he said that future financial coverage would proceed to depend on information and financial figures.

He additionally reiterated his stance that the Federal Reserve doesn’t ponder any rate of interest cuts this 12 months.

Rania Gule Market Analyst at XS.com mentioned, “Gold costs moved cautiously throughout Powell’s hawkish remarks, stabilizing close to the day’s excessive round $1,978 per ounce, representing a rise of roughly 0.53% since yesterday.

“Gold appeared to protect its features as a haven, supported by the expectations of some market traders for continued tightening by the Federal Reserve or at the very least sustaining rates of interest at elevated ranges for an prolonged interval, growing the chance of a recession.

“This, in flip, boosts gold as a haven for traders and merchants throughout instances of disaster.

“Powell talked about that for the Federal Reserve to contemplate chopping rates of interest, it could must see a dependable and sustained decline in inflation charges. Whereas shopper value figures sharply declined in June, he couldn’t depend on only one report back to assume a continued decline in inflation. His message to the markets was clear: the Federal Reserve must see extra information confirming a constant slowdown in inflation.

“Whereas the U.S. central financial institution retains its choices open, it’s anticipated that this would be the final rate of interest hike within the present tightening cycle. The discount within the cash provide, tighter lending circumstances, and sustaining high-interest charges for an prolonged interval in the USA point out that inflation is more likely to proceed slowing down. A slowdown in financial development can also be anticipated because of the Federal Reserve’s dedication to elevating rates of interest if needed.

“Such a decent financial surroundings all the time signifies an financial slowdown and probably an imminent recession, because the U.S. financial system can not stand up to larger rates of interest for an prolonged interval. Though the Federal Reserve retains its future choices open, it’s unlikely to lift rates of interest once more this 12 months.

“As measures to cut back inflation persist, they’ll weaken the financial system, inflicting corporations to really feel the influence of stricter credit score circumstances. Till this occurs, gold costs are more likely to stay confined within the vary between $1,980 and $1,950 till November.

“It is usually doable that the Federal Reserve is not going to make any modifications to rates of interest on the subsequent assembly in September, which might help an increase in gold costs, probably reaching an all-time excessive within the medium time period round $2,080 to $2,100.”