GOLD MARKET COMMENTARY – Gold market outlook constructive as U.S. rate hike trend could pause; prices buoyed by safe-haven demand

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Gold prices appear to be well-supported if U.S. monetary authorities pause their latest round of interest rate hikes this week as widely expected, with worries over a U.S. car workers’ strike underpinning the precious metal.

Gold was up 0.3 percent in the second week of September. The yellow metal stood at USD $1,923.37 per ounce, up 0.66 percent, on September 15, 2023.

The U.S. Federal Reserve is expected to leave interest rates unchanged later this week, ending a steady cycle of rate hikes, as authorities appear to have achieved some control over inflation.

Ending a rate hike cycle would be supportive for gold, as the yield on alternative assets may no longer be rising.

When U.S. rates eventually start falling, which some analysts expect to start next year, gold prices could rise.

Much will depend on the U.S. dollar though, in which gold is denominated.

The dollar eased on September 15 after publication of U.S. economic data, making gold more affordable in terms of other currencies.

However, if the dollar strengthens going forward, supported by a robust U.S. economy, gold could become more expensive in terms of other currencies, limiting any upside price pressure in the yellow metal.

Another key factor supporting gold prices has been “safe haven” demand for the precious metal due to worries over big pay rise demands sought in a car workers’ strike in the United States, while car companies will need to find huge investments to switch into electric vehicles which require less labour input in manufacturing than petrol or diesel vehicles.

At times of geopolitical turmoil and uncertainty, gold can attract large inflows of investor demand.

Nitesh Shah, Head of Commodities and Macroeconomic Research at WisdomTree Europe, told Kitco News: “Gold prices tend to rise in financial crises, economic downturns, and geopolitical shocks.”

(Disclaimer: any opinions expressed in this article are solely those of the author and should not be construed as investment advice.)

GOLD MARKET COMMENTARY – Gold market outlook constructive as U.S. rate hike trend could pause; prices buoyed by safe-haven demand

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