As a hawkish Fed lifts the currency and rates, gold is hovering near a 1-week low

22 Sep 2023 , 10:24 AM

Gold prices edged slightly higher on Friday but continued to trade near a one-week low reached in the previous session, as the U.S. dollar and Treasury yields benefited from the Federal Reserve’s rate-hiking policy.

Spot gold rose by 0.2% to $1,923.22 per ounce after experiencing its most significant daily decline since September 5. U.S. gold futures also increased by 0.2% to $1,943.00.

With expectations of higher U.S. interest rates persisting, the dollar remained near a six-month high, while benchmark 10-year Treasury yields reached their highest level in 16 years, leading to a significant sell-off on Wall Street.

The world’s largest central banks have signaled their intention to maintain interest rates at elevated levels to combat inflation, despite the culmination of two years of unprecedented global policy tightening. Higher interest rates can pose challenges for investing in non-interest-bearing assets like bullion, which is denominated in dollars.

In the coming months, the Fed’s outlook for a prolonged period of elevated interest rates may continue to exert pressure on equities and bonds, although some investors are skeptical about the central bank’s commitment to this stance.

Last week, U.S. unemployment claims dropped to an eight-month low, indicating that the labor market remains tight even as job growth slows.

The possibility of a government shutdown within just ten days has increased following U.S. House Speaker Kevin McCarthy’s failure on Thursday to advance his stalled spending program.

The largest gold-backed exchange-traded fund globally, SPDR Gold Trust, reported a 0.07% increase in its holdings on Thursday, bringing the total to 878.83 tonnes.

Spot prices for silver, platinum, and palladium all increased by 0.3%, reaching $23.44, $921.98, and $1,263.04, respectively.

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