Fed’s hawkish stance weighs on domestic, global gold markets

April 20, 2023 (MLN): Domestic bullion witnessed a decline in gold prices on Wednesday, with 24-karat gold settling at Rs216,850 per tola with a decrease of Rs550 amid rising political and economic uncertainty. 

Shortage of dollars has also fueled the fire which forced investors to park their lumpsum money in safe haven. 

According to the Karachi Sarafa Association, the price of 10-gram 24-karat gold fell by Rs471, reaching Rs185,914, while 22-karat gold was priced at Rs170,421.

International spot gold is down by 0.07%, trading at $1,993.4. U.S. gold futures stand at $2,005.5, down by 0.09%. Spot gold experienced a sharp decline of around 2% on Wednesday before making a quick recovery, leaving investors cautious about the future of the market.

Spot gold is trading below the key level of $2000, losing this will be a sign of weakness in the market.

On Wednesday, New York Fed President John Williams stated the need to continue using monetary policy tools as inflation is still at problematic levels.

On Tuesday, Fed official Bullard stated that there has not been much discernible progress on inflation and Wall Street was too optimistic, stating the need for additional interest rates hike.

Fed official Bostic stated that he wanted one more hike and then a long pause at above 5%. He said he was committed to the job of bringing inflation down to their 2% goal.

City Index’s Matt Simpson stated that gold prices may still rise despite the recent drop, as market analysts expect more Fed rate hikes before its next meeting. Investors bought gold at a lower price, but they are cautious of the Fed’s stance, as reported by Reuters.

The CME FedWatch tool shows that markets are pricing in an 83.7% chance of a 25-basis point hike in May.

The dollar index remained steady, and a stronger dollar can increase the cost of gold for buyers holding other currencies.

In line with gold’s downtrend, silver also saw a decline in its price internationally, with spot silver dipping by 0.61%, to stand at $25.12.

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