Bloomberg News reports that gold was found to be steady after it posted the week’s biggest gain since May, only to regain ground. This comes as investors weigh the prospects for stringent US monetary policy and concerns related to an economic slowdown.
Since March 2021, the bullion hit the lowest level in the past week as US Treasury yields eased out. Following increasing rates in June, which was the highest since 1994, it is anticipated that the Federal Reserve policymakers might support a surge of another 75 basis points when the next meeting takes place on July 26th – July 27th.
Ahead of Fed Meeting, Gold Steady
As the Fed tightens, followed by a dimming of the strong dollar, gold is headed for a straight fourth-month loss, and it is losing its place as a haven, thereby concealing inflation concerns and a probable slowdown. While Lawrence Summers, the former Treasury Secretary, doubts whether there will be a soft landing, Janet Yellen, the incumbent, stated that she is not seeing any signs that the economy is in recession.
The additional downward pressure on gold comes from the investors’ fading interest. It was also found that the exchange-traded funds backed by the bullions have ebbed to the lowest for the sixth straight week, as per the data that Bloomberg News has compiled. This has cut the holdings to the lowest since the beginning of March.
What About the Downside Risk?
According to Suki Cooper, an analyst of precious metals associated with Standard Chartered Plc, if it is assumed that the Fed will increase the rate by 75 basis points in July, it is believed that the bulk downside risk of the near-term will be priced in. However, the trend for the longer term will still be a downside. Given elevated inflation, flight to safety, and recession, this downside will likely be buffered in.
Bloomberg News also reports little change for spot gold at $1,727.67 per ounce in Singapore at 11.29 am. The prices were found sagging to as low as $1,680.99 just before the week ended on Thursday at 1.1% higher.
As far as the Bloomberg Dollar Spot Index is concerned, it was found to be steady after easing last week by 1%. While there was a drop in palladium and platinum, silver remained flat.
