On Friday, international gold prices fell further, away from overnight highs of $1847.87 an ounce since Nov. 22. Gold prices are sensitive to higher interest rates in the United States, which makes it less attractive to hold fruitless gold.
But the weekly gold price line is expected to close for the second week in a row, up more than 0.8% so far this week, as 10-year Treasury yields fall. Investors are now focused on the (FOMC) meeting of the Federal Open Market Committee scheduled for January 25-26 to get an update on the Fed's plan to raise interest rates.
Spot gold fell 0.36% to $1832.58 / oz at 16 43 Beijing time; the main COMEX gold contract fell 0.55% to $1834.4 / oz; and the dollar index fell 0.19% to 95.666.
The Fed has made it clear that it will raise interest rates this year-at its December meeting, every official expects to do so at least once, and half of them expect to do so three times-and it has made it clear that it will shrink its $9 trillion balance sheet as a second means of tightening monetary policy. The Fed is expected to give a clearer signal at its meeting next week that it is likely to raise interest rates in March and shrink its balance sheet later this year.
Ilya Spivak, foreign exchange strategist at DailyFX, said gold managed to hold its ground even though the Fed was more hawkish, probably because real interest rates were negative. Judging from the current market mindset, even if there is no difference in the Fed's position, the market will think that it is actually possible to favor dove surprises, and the rise in gold prices may be an initial immediate reaction.
"everything at the moment is a projection of the Fed's policy response function from multiple angles," said Sahil Mahtani, a strategist at Ninety One, an asset manager. Central banks are becoming increasingly hawkish and focusing on core inflation, but high energy prices have a significant impact on deep-rooted inflation expectations and will worry policy makers, he said.
Fed officials have laid out a seemingly clear plan to deal with high inflation, but they must now deal with new signs that the novel coronavirus epidemic is slowing the economy again, while facing market conditions that tighten financial conditions faster than they had hoped.
The United States and Western countries tried to show unity and tough stance on Ukraine on Thursday after US President Joe Biden said allies disagreed on how to deal with any potential "small invasion" by Russia.
If the worst comes to the worst in Ukraine, there may still be interest in dollar cash and ultra-short-term Treasuries. But the situation is still far from clear. The bet on "long dollar" because of the Fed's interest rate hike has become a very crowded trade, while the consensus on the appreciation of the dollar this year has been disappointing until January.
