Gold prices were volatile on Wednesday, especially after the Fed’s long-anticipated policy meeting. Gold prices spiked upwards to $1,687 per ounce, only to fall back to $1,672 per ounce. If gold prices continue to decline, support may be found at the 2020 low near $1,441 per ounce. Resistance may be found at around 1,740 per ounce and higher up at $1,765 per ounce.
Gold prices rose early on Wednesday boosted by increased risk aversion sentiment. On Wednesday, Russian President Vladimir Putin announced the partial mobilization of Russian military reserves from civilian conscripts. Putin also renewed threats to halt energy exports and threatened western allies with nuclear action. Markets reacted to Putin’s statement by turning to safe-haven assets, such as gold.
The US Federal Reserve voted to raise its interest rate by 75 basis points on Wednesday to curb soaring US inflation rates. While the rate hike was in line with market expectations and had largely been priced in, the dollar spiked upwards after the conclusion of the Fed meeting putting pressure on competing assets.
The dollar index rose above the 111 level, reaching a fresh 20-year high. US Treasury yields climbed early on Wednesday but retreated following the Fed meeting, with the US 10-year bond yield dropping from above 3.6% to below 3.5%.
The Fed released a statement after the policy meeting that was perceived as hawkish further boosting the dollar. Federal Reserve Chair Jerome Powel in a Press Conference after the meeting raised expectations for future rate hikes. Powel stated that the Fed is determined to curb inflation, even at the expense of economic growth, pointing to more rate hikes.
Gold prices are driven down by the shift of most major Central Banks toward a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. The ECB has performed its largest ever rate hike, raising interest rates by 75 basis points, pushing gold prices down and ECB officials hint at another steep rate hike at the ECB’s next meeting in October.
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