The central bank’s hawkish stance pushed yields on 10-year Treasuries and the dollar to multi-year highs. Rising rates and yields increase the opportunity cost of holding bullion, which is also seen as a hedge against accelerating inflation. For its part, a stronger dollar also makes gold less attractive to holders of other currencies.
While there is “the guidance from the Fed that they want to raise interest rates faster going forward, on the other hand we continue to see inflation accelerating,” said Giovanni Staunovo, an analyst at UBS.
“We continue to see relatively strong demand for physical (gold) bars and coins in general with market uncertainty and concerns about future economic growth due to high energy prices,” he added.
Minutes from the Fed’s March meeting showed heightened concern among policymakers that inflation had swept through the economy, with “many” participants willing to hike rates in steep 50-percent increments. basis points at the next monetary policy meetings.
For analyst Julius Baer, the key for gold remains whether economic risks rise or fall. “The tail and headwinds affecting gold are causing a “constrained price pattern”.
According to Carsten Menke, director of Next Generation Research at Julius Baer, the price of gold has remained within this range in recent weeks despite the fact that the war in Ukraine continues and no solution is in sight. And this is because “the market is currently facing the tailwinds of strong safe haven demand and the headwinds of a strengthening dollar and rising real US bond yields.”
“A reversal of risks would mean stagnant or somewhat lower prices, for example due to a shift in fighting to eastern parts of Ukraine only.” In any case, he concluded, “we continue to see gold as quite expensive insurance, even though it trades below its recent highs” of more than $2,000 touched a few weeks ago.
In other precious metals, spot silver rose 0.1% to $24.46 an ounce; platinum down 0.1% to $952.46; and palladium rose 1.2% to $2,223.69.
Source: Ambito
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