Gold is now at risk after Fed Chair Jerome Powel’s speech on Friday and could fall to 1,600 an ounce if buyers do not step in to buy the dip. Gold ended before the weekend by 0.8%, the last trading at $1,690 down with 1.32%.
The interest rates remain elevated without any pivot from the Federal Reserve as the markets are expecting. According to Powel, Friday means more restrictive policies to restore price stability and to bring down the high CPI number. Neither did Powel rule out another 75-basis-point hike at the next meeting in November. Yet, this will depend on the macro data release over the next several weeks.
According to the Fed, they want to avoid a similar mistake in the 70s of inflation running out of control or raising too late and would instead act aggressively now. Still, not only the yellow metal suffered, as there was weakness across all precious metals after the speech. The NASDAQ and the Dow tanked on the speech, following heavy losses across the board in Asia and Europe.
After the speech, the gold responded to the higher interest rates by tumbling further and the two-year Treasuries spiked at the same time, the inflationary expectations increased to new levels not seen since Fed Chairman Paul Volcker in the 1980’s. When you have an inflation threat such as this, the actual rates should move in a higher direction, but it could lead to further economic shocks within the economy, especially in the credit markets.
But as Powell’s message remains repetitive that higher rates are to come and remain with us you may see it helping the yellow metal as it could straighten out as investors realize inflation is here to stay. So, as you can see, if you want to invest in gold, now could be the perfect buying opportunity with gold hitting fresh lows not seen during the Covid Pandemic. “It’s a buying opportunity,” said Michael from Melbourne Gold Company, “it’s time to do this before the spot price moves north into a higher position once the economy tanks and the Fed is forced to Pivot into a high inflationary scenario. The fed is trapped between fighting inflation and supporting Wall St” Said Michael.
At Melbourne Gold Company who are industry leaders in the field of investing in gold bullion, people are lining up to purchase physical metals. Dedicated consultants are assisting everyday people buying for the first time and receive the best advice for buying gold. “People are just concerned about the economy and don’t trust what’s being said at the moment.”
“In addition, as we deal with refineries across Australia we are able to offer you leading market rates for gold and silver bullion that you wish to purchase with minimal disruption to supply.”