HG Markets

XAUUSD Rises As Dollar Weakens, But High Interest Rates Constraint


Harvest Global Markets :

At its meeting on June 13–14, the Fed is expected to hold off raising interest rates for the first time in more than a year, according to economists surveyed by Reuters. But before the Fed meeting on June 13, the U.S. consumer inflation report for May will be released, giving investors a clearer view of the state of the world’s largest economy. Despite the fact that consumer spending is strong in the United States, Treasury Secretary Janet Yellen noted that some industries are slowing down. Yellen stated that she anticipates ongoing success in reducing inflation over the following two years.

As U.S. bond yields increased on Wednesday, gold prices fell by 1%. For clues about the future of U.S. interest rates, investors are eagerly anticipating upcoming inflation statistics and the Federal Reserve policy meeting. The Bank of Canada’s recent move to increase interest rates to a 22-year high of 4.75% may have an effect on the Fed’s position.

In order to address worries about an overheating economy and persistently high inflation, market analysts forecast another rate hike next month. Market attention is still largely focused on inflation. Even though a pause by the Fed is anticipated, if inflation stays high, the outlook may change. The appeal of zero-yield bullion continues to wane as a result of increased interest rates, notwithstanding a small decrease in the dollar index that makes gold more accessible to investors using other currencies.

While investors eagerly await cues from the U.S. Federal Reserve, gold prices have witnessed a minor gain, backed by a weaker dollar. The market anticipates the U.S. consumer inflation report for May to better comprehend the economy in light of expectations that the Fed will maintain rates. The market’s concern about inflation has also been influenced by the recent increase in U.S. bond yields and the Bank of Canada’s interest rate decision. Although a halt in rate increases is predicted, persistently strong inflation may cause a change in the outlook. Gold is still a viable investment option despite the present Fed policy.

Early on Thursday, the market was below its midpoint, indicating that sellers may be returning. A prolonged advance above $1950 will indicate that substantial buyers are once again present. If this generates sufficient momentum in the near term, watch for a move up into the $2000 region. Longer term, a persistent move below $1950 will signal that there is still significant selling pressure. If this generates sufficient downward momentum, watch for the selling to potentially continue into $1920.

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