The price of gold has seen a series of declines since August, from around $1,808 to $1,688 per ounce, mostly influenced by the US dollar receiving support from Federal Reserve interest rate hikes.
Supported by a strong US economy still creating jobs, Reuters’ Hari Kishan reported, the Fed has stepped up its fight against inflation by raising interest rates faster than most other central banks.
“That has helped the dollar turn in one of its best performances in at least a decade.
“The dollar index, which was up around 15 per cent for the year, touched a fresh two-decade high of 110.55 on Tuesday.
“With most outcomes like higher interest rate differentials and safe haven moves expected to favour the dollar, the currency is likely to remain strong for longer,” Kishan said.
The current US dollar exchange rate is 2.5 per cent.
Fed Chairman Jerome Powell said at the recent Jackson Hole Economic Symposium that the US central bank would continue to raise interest rates.
The next Fed meeting on interest rates is to be held on September 21.
Based on these fundamentals, PP Link Securities business manager Long Samnang said: “The Fed will raise the interest rate further by 0.50 to 0.75 per cent.
“With such a high possibility of an interest rate hike, the price of gold will fall from its current $1,696 to $1,656 per ounce.”
However, Samnang remained optimistic.
“Compared to the global economy, the price of the yellow metal will rebound after the Fed raises interest rates.”
For this week’s trading recommendation, market analyst Samnang recommends investors to remain patient and buy gold at between $1,660 to $1,656 per ounce.