Gold prices hovered below $1,930 an ounce on Thursday, as investors fretted about a hawkish Federal Reserve, global growth prospects, and weak data from Europe.
The US central bank left interest rates unchanged at its latest meeting, as widely anticipated, but signaled another rate increase before the end of the year and fewer rate cuts in 2024. This hawkish stance weighed on gold prices, as higher interest rates make the non-yielding metal less attractive.
The dollar’s strength also dented gold’s appeal. The dollar index, which measures the greenback against a basket of major currencies, rose to its highest level since March 2020 on Thursday. A stronger dollar makes gold more expensive for buyers holding other currencies.
In addition to the Fed’s hawkish stance and the dollar’s strength, investors are also concerned about global growth prospects and weak data from Europe. The PMIs showed that business activity in the Eurozone continued to contract in September. This raised concerns about a potential recession in the region.
Meanwhile, the Bank of Japan maintained its ultra-easy monetary stance at its latest meeting. This dovish stance contrasted with the hawkish stance of the Fed and other central banks, and contributed to the dollar’s strength.
Overall, a combination of factors, including the Fed’s hawkish stance, the dollar’s strength, global growth concerns, and weak data from Europe, kept gold prices below $1,930 an ounce on Thursday.
One unique aspect of the current market environment is the divergence between the US and Japanese central banks. The Fed is aggressively raising interest rates in an effort to combat inflation, while the Bank of Japan is maintaining its ultra-easy monetary stance. This divergence is contributing to the dollar’s strength and weighing on gold prices.
Another unique aspect of the current market environment is the combination of global growth concerns and weak data from Europe. This is raising concerns about a potential global recession, which would be negative for gold prices.
Overall, the current market environment is challenging for gold investors. However, gold remains a valuable asset to hold in the long term, as it is a hedge against inflation and economic uncertainty.