Gold expected to prove resilient to rate hikes

Ahead of the US Federal Reserve’s interest rate decision, the price of gold surpassed the $2,000 level. Now, economists and analysts are concentrating on how the policy announcement might affect the precious metal, which is currently trading at $2025.75 per ounce.

The Fed will continue raising rates after the one on Wednesday. Many market participants now anticipate the Fed to announce a pause in rate hikes in light of the recent drop in inflation and early indications of weakness on the US labour market. Experts believe that such expectations might be unrealistic.

The rate increase that took place today won’t be the last, according to economists. As a result, any hopes for a quick change in interest rates are likely to be dashed because the market anticipates the first rate decreases in the second half of the year.

All of this suggests that interest rate expectations will increase, which will lead to a decline in the gold price. The Fed may be able to persuade the market of its aggressive posture, but this is by no means a given.

It’s also possible that any additional rate increases will be seen by the market as errors that could worsen a prospective US recession and drive the Fed to do an even more pronounced interest rate U-turn in the future. The rate hikes’ detrimental effects on the price of gold could potentially be balanced out by this.