Gold price decline limited by rising rate hike expectations after OPEC+ reduces output

Gold price decline limited by rising rate hike expectations after OPEC+ reduces output

Gold price decline limited by rising rate hike expectations after OPEC+ reduces output

Brief

  • Gold price decline limited by rising rate hike expectations after OPEC+ reduces output
  • Gold prices eased on Monday after OPEC+ made a surprise announcement of oil output cuts, sparking inflation concerns and raising bets on more central bank rate hikes.
  • Spot gold was 0.2% lower at $1,964.69 per ounce by 0924 GMT, having earlier slipped to its lowest in nearly a week at $1,949.54. U.S. gold futures were also down 0.2% at $1,982.00.
Gold price decline limited by rising rate hike expectations after OPEC+ reduces output

Gold price decline limited by rising rate hike expectations after OPEC+ reduces output

On April 3, gold prices experienced a mild decline following the unexpected announcement by OPEC+ of oil output cuts. This move sparked concerns over inflation and raised expectations for additional central bank rate hikes. As of 0924 GMT, spot gold was down by 0.2% at $1,964.69 per ounce, having earlier slipped to its lowest level in nearly a week at $1,949.54. U.S. gold futures were also down by 0.2% at $1,982.00.

The knee-jerk reaction to OPEC+ cutting production, coupled with the dollar’s rise, was pushing gold lower. However, some bargain hunters were entering the market at the $1960-$1965 level, which helped cushion the decline. According to Rhona O’Connell, an analyst at StoneX, the price decline was likely a temporary setback, and investors could see this as an opportunity to buy in at lower prices.

The announcement by OPEC+ caused a stir in the market as it was unexpected, and investors were not prepared for it. The move was aimed at controlling oil output, thereby stabilizing oil prices. However, it had a significant impact on the gold market, which saw a decline in prices. The rising inflation concerns and expectations of more central bank rate hikes, as a result of the production cut, led to investors turning to the dollar, which further weighed on gold prices.

Despite the temporary decline in gold prices, the long-term outlook for the precious metal remains positive, with many analysts forecasting a bullish trend in the coming months. Factors such as rising inflation, geopolitical tensions, and ongoing economic uncertainty due to the pandemic are likely to support gold prices in the long run. Investors are advised to exercise caution and monitor market developments closely, especially as the effects of the OPEC+ announcement continue to ripple through the market.

According to Rhona O’Connell, since energy is a significant contributor to inflationary pressures, the market is pricing in the likelihood of more rate hikes. As a result, there could be an increase in interest rates, leading to a decrease in the appeal of gold, which pays no interest.

On the other hand, European shares rose following an increase in crude oil prices, boosting oil-heavy stocks. However, gains were modest, and there were concerns about inflation leading to rising U.S. and European bond yields.

While gold is typically considered a hedge against inflation, the prospects of higher interest rates to curb rising prices could limit the asset’s appeal. This is because gold, unlike other financial instruments, does not earn interest, making it less attractive to investors seeking returns.

CME’s Fedwatch tool indicates that there is a 60.3% chance that the Fed will increase rates by a quarter point in May, according to market perceptions.

In March, British manufacturers experienced a deeper decline, but they expressed optimism as supply chain issues and cost pressures alleviated. This positive outlook could be viewed favorably by the Bank of England before its next rate-hike decision in May.

Following recent global banking upheavals, bullion increased by nearly 8% in the last quarter as investors speculated that the Fed would take a more moderate approach to rate hikes.

Carlo Alberto De Casa, an external analyst at Kinesis Money, stated that there are support levels at $1,935 and $1,920, while a recovery to $1,980 would indicate strength.

Meanwhile, spot silver decreased by 1.3% to $23.75 per ounce, platinum fell by 0.6% to $985.74, and palladium rose by 0.9% to $1,473.03.

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Sachin Chouhan is an avid entertainment enthusiast and dedicated follower of celebrity and entertainment news. He has always had a passion for the latest happenings in the world of entertainment and has made it his mission to stay up-to-date on all the latest trends, news, and gossip. With years of experience following the entertainment industry, Sachin has developed a keen eye for the latest celebrity fashion trends, music releases, movie reviews, and red-carpet events. His in-depth knowledge and expertise have made him a trusted source for entertainment news and celebrity updates. Contact us: admin@bollywoodfever.co.in

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