Aggressive Fed Pressure on Gold Prices: Lowest in 6 Months

Gold prices recorded the longest period of losing value since August 2022 as Fed officials signaled that interest rates would remain high for some time. The precious metal continued to shed losses on the second day of the week.

After the risk of a US government shutdown was postponed, hawkish guidance from US Federal Reserve (Fed) officials had an impact on markets.

Tough statements from Federal Reserve officials put pressure on gold prices. As the dollar wavered near new highs as expectations that the Federal Reserve would keep interest rates high for a longer period strengthened, gold prices fell.

SHOW STATEMENTS FROM FED OFFICIALS

Yesterday, Federal Reserve Chair Jerome Powell stated that the Fed wants to create a sustainable labor market and that they need price stability to achieve that, saying, “We are very focused on restoring price stability.”

Federal Reserve board member Michelle Bowman reiterated her call for multiple interest rate increases and said it would be appropriate to keep interest rates at a restrictive level for a while.

Federal Reserve Vice Chairman Michael Barr said the most important question is not the need for additional interest rate increases, but rather how long interest rates should be kept at a sufficiently restrictive level. Barr said this will take some time.

Cleveland Fed President Loretta Mester also said: “We will probably have to raise interest rates once again this year and then keep them higher for a while to catch up with inflation.”

LATEST SITUATION IN THE GOLD MARKET

In the wake of these developments, U.S. Treasury yields rose, while the dollar index, which rose 0.9 percent, had one of the strongest closes of the past year.

The statements drove investors into bonds and the interest-bearing dollar, prompting a suppression of the precious metal.

Continuing the downward trend for the seventh consecutive day, the price of an ounce of gold tested $1,815 and reached its lowest level since March 9. Spot silver also fell 0.8 to $20.90 an ounce, the lowest level in six and a half months.

While in the morning the ounce of gold was trading at 1,824 dollars, the gram of gold was trading at 1,612 TL. At the same time, a quarter of gold was sold for 2,635 TL and Republic gold was sold for 11,216 TL.

THE $1800 LEVEL IS CRITICAL

Kitco Metals senior analyst Jim Wyckoff said: “Interest rates are estimated to remain higher for much longer, and this is a bearish factor in the precious metals market. “Gold prices may fall below $1,800 in the short term,” he said.

“Trends in currency markets tend to be stronger and longer lasting,” Wyckoff said. “The strong dollar trend may not end soon, which puts the gold market under pressure,” he said.