Gold prices rise as major central banks hold rates steady

September 22, 2023 (MLN): International gold prices rose on Friday, despite stronger U.S. Dollar and bond Yields as the market weighed the major central banks’ decisions to leave interest rates unchanged.

International spot gold is currently trading at $1,924.07, up by 0.24% compared to the previous close.

The US Federal Reserve on Wednesday decided to leave interest rates unchanged at 5.25%-5.5%.

This marks the second time the Fed has not raised rates in the last 13 meetings.

Additionally, the Bank of England (BoE) on Thursday also decided to leave its key interest rate unchanged at 5.25%

Central banks for the world’s biggest economies have served notice that they will keep interest rates as high as needed to tame inflation, even as two years of unprecedented global policy tightening reach a peak, as Reuters reported.

“The markets looked at central banks and said you’re not stopping hikes because inflation is beat, you’re stopping because you’re worried that global growth is about to stop,” said Ilya Spivak, head of global macro at Tastylive.

“There is a very strong sense that global growth is running out of legs to stand on,” he added.

The dollar stood near a six-month peak on the prospects of higher-for-longer U.S. rates, while benchmark 10-year Treasury yields climbed a 16-year high and stocks remained under pressure.

Investors traditionally buy gold as a hedge against economic uncertainty, but higher interest rates tend to weigh on non-interest-paying bullion, which is priced in dollars.

Markets priced in a 45% chance of one more rate hike by the Federal Reserve before next year, while also seeing roughly a 44% chance of some easing in the first half of 2024, according to the CME FedWatch tool.

Traders also digested the Bank of Japan’s decision to maintain ultra-low interest rates, while awaiting key purchasing managers’ index (PMI) data out of the UK, the U.S., and the Eurozone later in the day.

International spot silver is currently trading at $23.56, up by 0.67% on the day.

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