The value of gold stabilized and held onto crucial levels on early Monday (17 April 2023) Asian trading session, following hawkish remarks by Federal Reserve officials concerning the trajectory of interest rate increases, which had prompted a significant amount of profit-taking in the preceding session.
On Friday, the price of gold plummeted by almost 2% following comments made by prominent Federal Reserve hawk, Governor Christopher Waller, who advocated for further monetary tightening, despite recent data indicating a gradual decline in US inflation levels from their 40-year peak in the previous year.
The remarks made by Governor Christopher Waller nullified the recent conjecture that the Federal Reserve was nearing its terminal rate and would soon halt its current cycle of interest rate hikes. In the past few weeks, the idea of a possible pause in rate hikes had gained momentum due to lower-than-anticipated inflation figures and indications of a sluggish labor market, which had resulted in significant gains for gold.
The future contracts for gold experienced a minor dip of 0.1%, with gold being priced at $2,002.49 per ounce, while the futures contracts for gold steadied at $2,015.25 per ounce. Last week, both instruments had gained momentum and traded approximately $40 below their all-time highs.
Over the past month, the demand for gold as a safe haven asset has been a major driver of its value, particularly in light of the collapse of several American banks. Although the concern about a larger crisis seems to have subsided, the anticipation of a potential recession in the United States this year has also contributed to an increase in the inflow of funds into gold.
The surge in U.S. interest rates in 2022 had a severe impact on non-yielding assets such as gold, but these assets made a rapid recovery this year as investors anticipated the conclusion of future rate hikes. According to Fed Fund futures prices, the markets are still anticipating one more hike in May, followed by a hiatus in June.