On Wednesday, international gold prices came under pressure as Fed officials called for a bigger rise in interest rates to combat inflation, dampening market sentiment, but concerns about the crisis in Ukraine still supported safe-haven demand for gold.
Spot gold fell 0.12% to US $1918.96 / oz at 15 27 Beijing time; the main COMEX gold contract fell 0.12% to US $1919.2 / oz; and the dollar index rose 0.07% to 98.502.
Michael McCarthy, chief strategy officer at Tiger Brokers in Australia, said: "the possibility of a rise in global interest rates has put pressure on [gold]. At the same time, people's demand for risk aversion plays a supporting role in the face of geopolitical conflicts in Ukraine. "
St. Louis Fed Chairman Brad on Tuesday (March 22) again called on the Fed to raise its benchmark overnight interest rate above 3% this year: "the Fed needs to take aggressive action to control inflation as soon as possible."
Brad disagrees that the Fed raised interest rates by only 25 basis points in March, and he has expressed the same view before. But his views seem to be gaining support. The market expects the probability that the fed will raise the federal funds rate by 50 basis points in may at 72.2%, up sharply from the probability of slightly more than 50% on Monday.
On Monday, Federal Reserve Chairman Colin Powell said the Fed must raise interest rates "quickly." When asked what would stop the Fed from raising interest rates by 50 basis points at its May 3-4 policy meeting, he replied: "nothing."
Ukrainian officials said fierce street fighting and bombing broke out the day after Mariupol rejected Russia's surrender ultimatum. Hundreds of thousands of people are trapped in buildings without access to food, water, electricity or heating.
Despite slow progress in negotiations between Ukraine and Russia, the west plans to announce more sanctions against the Kremlin as the humanitarian crisis worsens. Optimism about a solution to the Ukraine problem is beginning to fade, leading some traders to believe that gold prices are likely to rise.
