Gold Market Shows a Downward Shift
Author: Christian Roberts - Photographer / Content Editor
Published: 7 Mar 2023
Last Updated: 7 Mar 2023
Synopsis
The gold market has been showing a downward shift, due to investors' anticipation of FRC Jerome Powell's testimony on 07/03/2023. The investors are seeking crucial insights into future developments in U.S. interest rate hikes. The latest update reveals that spot gold was noted to be down by 0.4% at $1,839.54 per ounce by 1244 GMT, while on Monday, prices had peaked at $1,858.19, reaching a high point of over two weeks. Meanwhile, U.S. gold futures witnessed a drop of 0.5%, amounting to $1,844.50.
Gold Market Downward Shift Due to Investors Anticipating FRC Jerome Powell's Testimony
The USD gold market has been showing a downward shift, due to investors' anticipation of FRC Jerome Powell's testimony on 07/03/2023. The investors are seeking crucial insights into future developments in U.S. interest rate hikes. The latest update reveals that spot gold was noted to be down by 0.4% at $1,839.54 per ounce by 1244 GMT, while on Monday, prices had peaked at $1,858.19, reaching a high point of over two weeks. Meanwhile, U.S. gold futures witnessed a drop of 0.5%, amounting to $1,844.50.
Impact of Potential Policy Indications on Gold Market
As a result, the dollar index has gained 0.2%, which makes bullion less affordable for overseas buyers. Precious metal Investors and many analysts are keenly awaiting Powell's mid year testimony in front of Congress on Tuesday and Wednesday. Furthermore, with the U.S. jobs report for February scheduled to release on Friday, Gold's pursuit to extend gains is highly influenced by potential policy indications from Powell's testimony and the incoming U.S. payrolls report. Han Tan, the chief market analyst at Exinity, points out that the market's sentiment is that the upcoming US jobs report could pave the way for higher US rates, which would erase the month-to-date gains gathered by gold.
The Impact of Higher Interest Rates on Gold Market
Gold is often regarded as an effective hedge against inflation, but the attractiveness of the yellow metal diminishes in the face of rising interest rates. This is because higher interest rates increase the opportunity cost of holding an asset that yields no interest, which adversely affects bullion's appeal. Therefore, any upward trend in interest rates can lead to reduced demand for gold as investors seek to allocate their funds in higher-yielding alternatives. A hawkish testimony by Powell has the potential to obliterate bullish momentum in gold. Craig Erlam, the senior market analyst at OANDA, suggests that this could bring gold prices back to their lows, hovering around $1,780-$1,800.
Impact of China's Gold Reserve Value and Investment Demand on the Market
The overall value of gold reserves held by China, the largest consumer of gold, fell to $120.28 billion at the end of February, down from $125.28 billion at the end of January. Nonetheless, Krishan Gopaul, the senior analyst at World Gold Council, indicates that central banks are likely to continue purchasing gold in 2023. Investment demand, in terms of bullion, is expected to surge this year.
Downward Trend in Precious Metals Market
Additionally, other precious metals such as spot silver, platinum, and palladium, have also experienced a downward trend. Spot silver lost 0.7% at $20.90 per ounce, platinum edged 1.3% lower at $963.00, and palladium fell 0.7% to $1,429.44.
Advice for Gold Investors
As a gold investor, it is essential to keep a close watch on upcoming policy indications and changes. The current market scenario is undoubtedly volatile, and any policy-related announcements have the potential to significantly impact gold prices. Despite the short-term fluctuations, gold has historically been a safe-haven asset, and its long-term potential has been demonstrated time and again. Therefore, it is crucial to maintain a long-term perspective while investing in gold.
Related Articles
This guide and its content is copyright of Chard (1964) Ltd - © Chard (1964) Ltd 2024. All rights reserved. Any redistribution or reproduction of part or all of the contents in any form is prohibited.
We are not financial advisers and we would always recommend that you consult with one prior to making any investment decision.
You can read more about copyright or our advice disclaimer on these links.