Gold Price Hovers Around $1,930 Amid Fed’s Hawkish Stance and Rising US Yields

Gold price remains steady around the $1,930 mark as investors shift their attention to upcoming US economic data following the Federal Reserve’s recent policy decision. However, the Fed’s hawkish stance on interest rates and rising US bond yields are putting pressure on the precious metal’s prices.

Here’s a breakdown of the key factors influencing the gold market:

1. Fed’s Hawkish Stance: The Federal Reserve, as expected, decided to maintain the current benchmark policy rates at 5.5% during its recent meeting. This decision, combined with the Fed’s projection of slightly higher inflation, has led to expectations of an additional rate hike in 2023. Notably, the Fed revised its projected interest rates for 2024 upward, from 4.6% to 5.1%. This stance has bolstered the US Dollar (USD).

2. USD Index at Six-Month High: The US Dollar Index (DXY), which measures the USD’s performance against major currencies, has reached a six-month high around 105.50. The USD’s strength is partly attributed to the Fed’s hawkish stance.

3. Rising US Treasury Yields: Higher yields on US Treasury bonds are contributing to the USD’s strength while simultaneously weakening the appeal of non-yield-bearing assets like gold. The yield on the 10-year US Treasury note has surged to 4.43%, reaching levels not seen since 2007.

4. Fed’s Commitment to Inflation Target: In a post-rate decision press conference, Federal Reserve Chair Jerome Powell reiterated the Fed’s commitment to achieving its long-term inflation target of 2%. Powell also suggested that the central bank may be nearing the peak of its interest rate hike cycle, but emphasized that future policy decisions would be data-driven.

Upcoming US Data Releases: Investors are closely monitoring forthcoming US data releases scheduled for Thursday. These include the weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Survey, and the change in Existing Home Sales. These reports will provide insights into the US labor market, manufacturing sector, and real estate market, all of which play significant roles in shaping economic sentiment.

In summary, gold’s price stability around $1,930 is influenced by a combination of factors, including the Fed’s hawkish stance on interest rates, the strength of the US Dollar, and rising Treasury yields. The outcome of the upcoming US data releases will be closely watched for further market direction as investors assess the health of key sectors within the US economy.