As investors anticipate a major Fed rate rise, gold is up

15 Jun 2022 , 11:58 AM

Weaker Treasury rates raised gold prices from near one-month lows on Wednesday (15-06-2022), ahead of a possible aggressive interest rate rise by the US Federal Reserve to battle inflation amid rising worries of an oncoming recession.

As of 02:29 GMT, spot gold was up 0.5 percent at $1,817.12 per ounce, after falling to its lowest level since May 16 at $1,803.90 on Tuesday. Gold futures in the United States climbed 0.3 percent to $1,818.50.

Later in the day, the Federal Open Market Committee is likely to announce its interest rate decision at 18:00 GMT.

“In our perspective, the gold price is more likely to climb before the session (Fed announcement), stay steady, and then continue its downward trend over the course of the next week,” said Michael Langford, director at business advisory AirGuide.

Investors have drastically increased their wagers that the Fed would raise interest rates by 75 basis points (bps) instead of 50 bps, fueling a major selloff across global markets.

The opportunity cost of storing bullion, which pays no interest, rises when short-term interest rates and bond yields rise in the United States.

Benchmark Gold was supported by a drop in 10-year Treasury rates from a multi-year high. 

“We believe the generally negative trend in the gold market will be continued over the next several weeks, with gold dropping below $1,800/oz,” Langford said.

As shell-shocked investors waited to see how aggressive the Fed would be on rates, Asian markets were in a contemplative mood, with many fearful that extreme action might send the world into recession. [MKTS/GLOB]

The dollar remained near its two-decade high from the previous session, making greenback-priced bullion less appealing to purchasers holding foreign currencies.

Silver jumped 0.7 percent to $21.22 per ounce on the spot market, while platinum gained 0.8 percent to $926.89 and palladium gained 0.5 percent to $1,824.71.