Gold struggles amid hawkish signals

The gold price has moved back to flat position on the day to print around $1,629.25 after moving between the $1,622.54 low and the $1,628.93 high for most of the session, reversing two losing sessions as the US dollar eased. At the time of writing the precious metal is trading at $1627.68 versus Wednesday’s closing price at $1629.29

There has been a disparity in the price of the US dollar and US yields which may come back to hit gold before the weekend, however. Federal Reserve Bank of Philadelphia President Patrick Harker said Thursday the central bank is not done with raising its short-term rate target amid very high levels of inflation. His most hawkish of comments sent yields to fresh cycle highs, the strongest in a decade.

Harker also said the Fed has made disappointing progress at lower inflation and added that inflation in 2023 would fall to around 4% and 2.5% in 2024, which is still above the 2%. as such risk sold off, yield and the greenback rallied weighing on the price of gold.

Bond yields rose, with the US 2-year note last seen paying 4.593%, up 0.75%, after reaching to the highest since 2008 at 4.614%:

It has been a particularly troubling time in markets this week, with UK politics a major driver of volatility, feeding into the doom loop for gold prices at times of risk-off. However, the bearish topics could intensify for the precious metal as jumbo rate hikes are around the corner.

With the Truss melodrama over, global investors can now focus back on upcoming central bank meetings. The battle against inflation will be firmly on the minds of investors as markets head into these meetings, and in this context, gold will likely continue to struggle given inflation’s increasing persistence.

Factors impacting gold prices throughout most of 2022 are expected to turn into tailwinds by the second quarter of 2023 as US interest rates and the US dollar top out at the start of the year. Gold prices are also expected to hold relatively steady for the next few months and make another run back above $1,700 an ounce by the second quarter of 2023 according to observers.