Gold Price has dropped below $1,880 as the new week gets underway. On Wednesday, the US Federal Reserve is broadly expected to raise interest rates by 50 basis points. However, this event should not impact the yellow metal, in the opinion of strategists at Commerzbank.
Gold under pressure as eventful central bank week begins
“Gold is pushing lower. This is presumably due in part to the persistently firm US dollar and the recent renewed rise in bond yields.”
“Financial investors have been retreating from gold: the gold ETFs tracked by Bloomberg registered outflows every day last week (12 tons in all), bringing the series of 14 consecutive weeks of inflows to an end. According to the CFTC’s statistics, speculative financial investors likewise reduced their net long positions further in the week to 16 April – namely by 20% to a good 81,000 contracts. This puts them at their lowest level since early February.”
“According to the Fed Fund Futures, the market expects interest rate hikes of 200 basis points in total by the end of September. A rate hike of 50 basis points on Wednesday evening should therefore come as no surprise, nor weigh additionally on the gold price, especially as Fed Chair Powell has more or less announced this in advance.”
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