World gold prices have continued to rise recently, and the spot price of gold hit a record high of $2,080 per ounce on May 4.
On May 3 local time, the US Federal Reserve Board concluded its two-day monetary policy meeting and announced that it would raise the target range of the federal funds rate again by 25 basis points to between 5% and 5.25%. This is the 10th rate hike since the Fed entered the current rate hike cycle in March 2022, with a cumulative rate hike up to 500 basis points.
Federal Reserve Chairman Powell stated at a press conference held after the meeting that the monetary policy meeting that ended that day did not make a decision to suspend interest rate hikes. If more restrictive monetary policy is required, the Fed is prepared to do so. The pullback in inflation will take some time, and it may well be appropriate to consider a rate cut after further weakening in demand and the job market.
Market analysis believes that, on the one hand, from the perspective of market sentiment, gold has benefited from the increase in safe-haven demand. As the credit turmoil of banks such as Silicon Valley Bank and Credit Suisse has triggered panic in the global financial market, investors have sought safe assets to hedge risks. On the other hand, the Fed raised interest rates within expectations, and Powell was dovish about further interest rate policy. Affected by this, the U.S. dollar and U.S. bond yields continued to fall, and gold and silver rose sharply due to strong stimulus.
In addition, U.S. inflation data also showed a downward trend, further weakening the support of the dollar. A weaker dollar is positive for gold. At the same time, geopolitical risks have also brought support to gold, driving up demand for gold.
From the perspective of supply and demand, gold will benefit from the purchases of central banks and investors in 2023. According to statistics from the World Gold Council, global central banks will purchase 1,136 tons of gold in 2022, a record high since 1950.
Edward Mayer, metals analyst at Marex, said investors were paying close attention to the U.S. debt-ceiling talks and the subsequent Fed meeting, which could provide some guidance for expected gold prices. "Gold may be more sensitive to upside risks given the unease tone in the banking sector and uncertainty about the debt ceiling."
"Concerns over U.S. regional banks and the debt ceiling suggest further volatility in world gold prices," said Standard Chartered analyst Suki Cooper.