Gold Price Forecast: XAUUSD defies rate hike expectations – Commerzbank

50 basis points rate hikes will be on the table at the upcoming Federal Reserve (Fed) meetings. However, Gold Price is showing its strength against this backdrop, economists at Commmerzbank report.

Gold bucks rising interest rate expectations

“Gold is presumably being kept in check primarily by the rising bond yields. After dipping briefly, yields on ten-year US Treasuries are nearing the 3% mark again. The increased yields probably also reflect the higher interest rate expectations.”

“Judging by the Fed Fund Futures, the market is now anticipating a big rate hike at the next meeting. The interest rate expectations for the subsequent meetings have also risen noticeably – with rate hikes of nearly 50 basis points priced in for the meetings in June, July and September. The fact that gold is not falling or indeed coming under serious pressure against this backdrop is a sign of strength.” 

“It seems that market participants do not entirely believe that the Fed will succeed in getting inflation under control with the expected rate hikes. Furthermore, they appear concerned that the Fed will strangle the economy by following an overly aggressive course.”