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Back to November 2021

The price of gold appears to be temporarily stuck, wavering just under the $1,800 mark, as it awaits the result of the US Federal Reserve’s monetary policy meeting this week. Investors will be waiting with bated breath to find out the decision on further US stimulus tapering, which could have a knock-on effect on precious metals.

Gold Sticks as The Dollar Spikes

Gold has been hovering around in $1,700 territory and lacking any clear direction over the last week or so. The yellow metal appears to be holding its breath right now – each time the price hits the $1,800 mark, it seems to dip cautiously back down below again.

Gold has been under pressure due to signs of a strengthening US economy which saw a robust dollar trading near a 2 ½-week high last week.

Investors are now cautiously waiting for the result of the US Federal Reserve meeting, expected on Wednesday, which may see further stimulus tapering and interest rate hikes.

Watch The Central Banks

This week’s US Federal Reserve meeting result on Wednesday will be key, after the Core Price Index (CPE) data released on Friday showed another uptick in inflation. However, it is still unclear whether the Fed’s view that inflation is transitory and should moderate with time, is correct or not.

This new CPE data validated expectations that the Fed will respond aggressively to help contain high inflation, and that it may announce the further tapering of its stimulus program and change interest rates, having a knock-on effect on gold.

Investors should also keep a close eye on other central banks this week. The Reserve Bank of Australia are also due to hand over their policy update on Tuesday, and the Bank of England will announce their decision on Thursday this week.

A Knock-On Effect

Gold is often effectively used as a hedge against inflation and the currency degradation likely from stimulus programmes. The announcement from the Central Banks of the unravelling of these measures would no doubt have an effect on precious metals. A change in interest rates would also have an impact.

As always, we can only speculate on will or will not happen. Keep a close eye on the decisions made by the Central Banks this week as the results will no doubt reflect in the movement of the gold price. And, even if we see a negative reaction – don’t panic. History tells us that the gold price is very likely to recover quickly, and even rise to new heights. We see no reason to change our long-held belief in the value of keeping a little of what we’re worth in physical gold, as a safety net for a time when we may really need it. Simple.

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.


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