On Wednesday (May 4), the US Federal Open Market Committee (FOMC) announced the latest interest rate decision, raising the benchmark interest rate by 50 basis points to a range of 0.75%-1.00%, in line with market expectations. The U.S. dollar index fell to a one-week low, the S&P 500 recorded its biggest gain since May 2020, and U.S. bond yields fell after the Fed raised interest rates by the most in two decades, Powell eased market expectations that the Fed will take a more aggressive tightening pace 's concerns. Spot gold once rebounded by nearly $30 from the daily low to $1889.54 per ounce, and closed above the 1880 mark in late trading. U.S. oil rose more than 5 percent, Brent broke the 110 mark and the European Union, the world's largest trading bloc, drew up plans to phase out imports of Russian oil, raising concerns that the market will tighten further as these countries seek ample supplies.
Gold prices rebounded sharply on Wednesday. Spot gold once rose by more than 1%, reaching a recent two-day high of $1,889.54 per ounce, as the dollar and U.S. bond yields fell. After the Fed raised interest rates as expected, Powell downplayed 75 interest rate hikes. base point outlook. The dollar index fell to a one-week low as Powell said inflation was too high, making gold more attractive to holders of other currencies. Benchmark 10-year U.S. Treasury yields also edged lower.
Suki Cooper, an analyst at Standard Chartered Bank, said that the market had expected a hawkish bias at the Federal Open Market Committee (FOMC) meeting in May, but the gold market believed that relative to hawkish concerns, as widely expected, the 50 basis point rate hike was dovish. group. We still believe that gold prices will refocus on real yield trends over time and lower in the second half of the year, but concerns about inflation, geopolitical risks and slowing growth make it easier for gold prices in the near term Upside risks arise.
"Commodities face increasing risk this year of a 2008-like wild rise, a trend that could have implications for gold," Mike McGlone, senior commodities strategist at Bloomberg Intelligence, said in a May outlook report. Impact. Commodity prices have risen 50% over the past 10 years, producer price index (ppi) has risen 30%. As the world faces a potential recession and the Fed tightens, the gains may come back.”
The gold market looks stable. McGlone pointed out that once the market determines the end of the Fed rate hike cycle, gold prices may break the key psychological threshold of $2,000 an ounce. The call from the Federal Reserve against the price of copper and other industrial metals against the backdrop of global gross domestic product (GDP) downgrades and falling stock markets appears to end up in gold's favor. The precious metal should break above resistance at $2,000 an ounce when fed funds futures start to anticipate the end of the rate hike cycle.
The gold price base is currently around $1,800 an ounce, with key resistance at $2,000. The veteran strategist noted that it is only a matter of time before gold prices break through this resistance level. "One of the biggest potential catalysts is the bottoming out of Fed rate hike expectations, which may not come until the stock market falls further," he said.
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