The Magazine for Asian Investors
Gold futures fell for a fourth straight day Wednesday (Aug. 31) as investors remain concerned that the Federal Reserve will raise interest rates to curb inflation.
- Gold futures fell $10.1, or 0.58%, to $1,726.2 an ounce. The price of gold fell 3.1% in August.
- Silver was down 40.5 cents, or 2.21%, at $17.882 an ounce.
- The platinum contract dropped $5.1, or 0.61%, at $827 an ounce.
- Palladium was down $8.90, or 0.4%, at $2,078.90 an ounce.
Gold futures fell below $1,730 in anticipation of a Fed rate hike. Recently, the chairman of the U.S. Federal Reserve (Fed) Cleveland branch said that the Fed should raise interest rates above 4% by early 2023 and hold them at that level for some time. In doing so, he signaled that the Fed is unlikely to lower interest rates next year.
The remarks were in line with Fed Chairman Jerome Powell, who said at Friday’s (Aug. 26) meeting in Jackson Hole that the Fed will continue to raise interest rates to bring inflation back to its target. And he also said that the Fed will keep rates high for some time after the rate hike measures are completed.
Although gold is considered a hedge against inflation and a safe haven in the face of political and economic uncertainty, the Fed’s tendency to raise interest rates has overshadowed the positive factors. This is because a rising interest rate increases the cost of owning gold, as gold is an asset that does not yield interest.
CME Group’s latest FedWatch tool shows that investors are 70.5% expecting the Fed to raise rates by 0.75% to 3.00-3.25% at its September 20-21 meeting, and only 29.5% expecting the Fed to raise rates by 0.50%.
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Thursday, September 1, 2022