On Wednesday (Feb. 16), international gold prices held steady after the previous session of turmoil, as the weaker dollar offset support from easing tensions between Russia and Ukraine. Investors are looking back to the Fed.
Spot gold rose 0.05% to $1854.52 / oz at 15 22 Beijing time; the main COMEX gold contract fell 0.03% to $1855.7 / oz; and the dollar index fell 0.09% to 95.907.
Gold hit an overnight high of $1879.55 an ounce since June 11 last year, but then fell back to close down nearly 1 per cent. Russia says some Russian troops are returning to their bases after military exercises near Ukraine have dissipated fears of a Russian invasion of Ukraine this week.
Michael Langford, director of AirGuide, a corporate consultancy, said that looking ahead, gold could fall as the crisis in Ukraine eased further, and the more alternative dollar would be preferred by core investors.
The Fed will raise interest rates by 25 basis points after its March policy meeting, according to the survey. But there is growing concern that the Fed may choose a more aggressive 50-point range to open the current cycle of interest rate hikes.
Inflation is rising around the world, especially in the US, where headline and core inflation hit a 40-year high last month. This has put pressure on the Fed not only to raise interest rates, but also to shrink its nearly $9 trillion balance sheet.
"the risk is at some point," Ethan Harris, head of global economic research at Bank of America Securities, said of inflation. They will turn to raising interest rates by 50 basis points, because in the face of the kind of news we are seeing now, it is very unusual for central banks to impose zero interest rates. I do think the Fed is behind the curve. In my opinion, the Fed should have started raising interest rates last fall, so they have something to do. "
Philip Marey, senior US strategist at Rabobank, said: "since no one knows exactly where neutral interest rates are, interest rates may eventually reach the ceiling before the Fed realizes, which could eventually lead to a recession."
