International Gold (XAUUSD) News
Gold Prices Fall Amidst Hawkish Fed Stance
Gold prices experienced a downturn on Wednesday, August 2, 2023, as investors reacted to the Federal Reserve’s recent hawkish stance on interest rates. The Fed raised its key interest rate by 50 basis points and signaled its determination to continue aggressive monetary tightening to combat inflation.
Fed Commits to Fighting Inflation
At the conclusion of its two-day policy meeting, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to 2.25% to 2.5%. The move was widely anticipated but the accompanying statement indicated that the Fed is prepared to take further action if necessary to bring inflation under control. The FOMC stated that “ongoing increases in the target range will be appropriate.”
Dollar Rises, Gold Loses Appeal
The hawkish stance from the Fed supported the U.S. dollar, which strengthened against major currencies. A stronger dollar makes gold less attractive to buyers holding other currencies, as it becomes more expensive to purchase. Gold is often viewed as a safe haven asset, but its appeal can diminish when interest rates are rising.
Technical Analysis Points to Further Weakness
Technical analysts have observed a bearish trend in gold prices, suggesting that further weakness may lie ahead. The metal has recently broken below key support levels, which could trigger additional selling. The 200-day moving average, often seen as a gauge of the long-term trend, is also providing resistance to any upward attempts.
Market Outlook
Market participants are now looking ahead to the upcoming U.S. non-farm payrolls report on Friday, August 5, for further clues on the state of the economy and the Fed’s policy path. A strong jobs report could bolster the dollar and put further pressure on gold prices. However, analysts also note that gold has a history of price swings during periods of uncertainty, so the market could be volatile in the near term.
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