Gold prices wrapped up the week with minimal movement, bouncing back from a brief dip to a one-week low. The ongoing debate in the financial world revolves around whether the Federal Reserve will implement its final rate hike for the year in November or December.
Ed Moya, an analyst at the online trading platform OANDA, noted, “We’re also seeing some safe-haven interest in gold due to concerns about weakening global economic prospects. Gold has clearly established the $1,900 level as a crucial support, and it now appears poised to consolidate around the $1,950 mark.”
In Friday’s trading, the most-active gold futures contract on New York’s Comex, set for December, closed with a $6 gain, equivalent to a 0.3% increase, reaching $1,945.60 per ounce. For the entire week, it recorded a marginal decline of just 0.03%.
As of 15:10 ET (19:10 GMT), the spot price of gold stood at $1,925.01. Spot gold, which is determined by real-time trades in physical bullion and closely followed by certain traders, saw a $4.90 uptick, translating to a 0.3% gain for the day. Over the course of the week, it experienced a modest increase of 0.1%.
Moya emphasized that for gold to reclaim the $2,000 level, investors would need to witness significant weakness in the dollar, a shift contingent on observable signs of labor market improvement.
On Friday, the Dollar Index reached its highest point in six months, curbing the enthusiasm of investors holding other currencies for dollar-denominated commodities. However, this was partly offset by a decline in U.S. bonds, exemplified by the 10-year U.S. Treasury note, which reached its highest level since 2007 before retracting.
This week saw both yields and the dollar surging after the Federal Reserve unveiled its projection for another quarter-percentage point rate hike by year-end. This decision was made despite keeping rates unchanged for September, as announced during the policy meeting on Wednesday.
Fed Chairman Jerome Powell, during a news conference on Wednesday, clarified, “We are ready to further raise rates if deemed appropriate. Maintaining the current policy rate this time doesn’t indicate a final stance on monetary policy.”
Between February 2022 and July 2023, the Fed had already raised interest rates 11 times, adding a total of 5.25 percentage points to the previously set base rate of just 0.25%. The central bank anticipates that U.S. rates will stabilize around 5.1% through 2024.
Looking ahead, the Federal Reserve has two remaining policy meetings this year, scheduled for November and December. The financial markets are closely watching and speculating about which of these two months the central bank will select for its final rate hike of 2023.