Gold price is still on the retreat. Attention is turning to the rate hike decision to be taken by the US Federal Reserve. If FOMC Chairman Jerome Powell's comments on the policy outlook suggest a possible 50 bps hike in the future, the yellow metal could suffer further weakness, strategists at Commerzbank report.
Also read: Gold Price Forecast: XAUUSD consolidates losses ahead of FOMC's announcement
Slump in XAU/USD is excessive given that the Ukraine conflict is still far from resolved
“We regard the slide in the gold price to be excessive given that the war in Ukraine is continuing and the conflict is still far from resolved.”
“It seems certain that the Fed will raise interest rates for the first time since the end of 2018, in all likelihood by 25 basis points. A bigger rate hike by 50 basis points is probably off the table due to the uncertainty generated by the war in Ukraine.”
“At his most recent testimony before Congress, Fed Chair Powell had hinted that a bigger rate hike of 50 basis points might be possible at some point during the cycle. If Powell were to repeat this comment, gold might come under further pressure despite the interest rate expectations that are already priced in.”
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