Gold Price Forecast: XAU/USD to shrugg off Fed rate hikes – Commerzbank

Gold price has fallen to $1,965 this morning due to positive signs from the talks conducted by Russian and Ukrainian representatives, which are giving rise to hopes of rapprochement. Another focus this week will be on the meeting of the US Federal Reserve’s Open Market Committee. Economists at Commerzbank do not expect rate hikes to undermine the yellow metal.

Fed meeting moving into focus

“There are hopes that the war in Ukraine might end. This is increasing risk appetite among market participants and reducing demand for gold as a safe haven accordingly. Bond yields are also rising significantly in response to the supposed easing of tensions, which makes gold as a non-interest-bearing investment less attractive.” 

“We envisage a total of six rate hikes of 25 basis points each by year’s end. The Fed Fund Futures are now even pricing in almost seven rate increases for this year. This should no longer weigh additionally on the gold price. This would change if the Fed were to incorporate a more pronounced rate hike at some point. It will be important therefore to see how inflation develops over the next few months.”