Gold traders and investors were paying close attention this week to the key statement from the Federal Open Market Committee (FOMC) meeting, as were other global economy watchers.
With the July FOMC statement – which the body uses to communicate monetary policy – on the Federal Fund Rate due, an increase in the latest range was expected, said PP Link Securities business manager Chhea Chhayheng.
The June range of 1.50 per cent to 1.75 per cent came as FOMC officials sought to find tools to tackle rising inflation, which was at 9.1 per cent at the end of June, a new high since November 1981.
According to Forexfactory, the forecast for the July interest rate is 2.50 per cent, meaning the basic phase of 0.25 per cent has already been possible, Chhayheng said.
He added that since US interest rates have increased, the pull for both investors and traders in buying gold has faded, with the rate hike still pushing down the price.
The price of gold was around $1,717 per ounce on Wednesday, $10 down from last week’s closing price of $1,727 per ounce.
“For market trends in general, the value of the dollar is expected to benefit from the sense of a US interest rate hike despite no additional increase in July,” Chhayheng said.
The gold market has seen a sharp decline in the past three months as both the US dollar and bond yields have risen.
Based on technical analysis, Chhayheng said the price of the yellow metal is heading close to a bottom as its current price sees support at $1,700 per ounce.
One reason for optimism that gold can return to being bullish is that the US Federal Reserve is nearing the end of its tightening cycle rather than the beginning, he added.
