Fed Chairman Jerome Powell’s words at Jackson Hole cleared the air of the previous year’s underestimations of the crisis and inflation and negatively shook markets, and all assets suffered large losses. Against this backdrop, to preserve the value of their investments, insiders put their trust in safe-haven assets such as gold.
The most popular so-called safe-haven assets are indeed precious metals such as gold and silver, however, the words of the Federal Reserve Chairman, seem to have brought problems to this sector as well.
Gold falls in price
As for gold, the price per ounce capitulated to a six-week low, breaking support at $1,700 a piece.
Silver followed in the yellow metal’s footsteps and fell to $17.80 an ounce.
Both precious metals also lost ground against the U.S. dollar by 0.85% and 0.89%, respectively.
Palladium also lost ground passing hands 4.18% lower.
This year in both the U.S. and the European Union, inflation has exceeded 9%, and this has turned into the most unexpected drop in metals ever for analysts who were placing confidence in them.
An ounce of gold against the U.S. dollar reached $2,070 on March 8, 2022, while silver had reached its high of the year or $26.46 an ounce, however, silver has lost 23.14% of its value from the beginning of the year to date.
At the start of ribbons, gold recorded 1,827.49 dollars an ounce while today fell to 1,695.45 dollars reaching a loss of 7.22%.
The U.S. Central Bank which sees as a major battle fighting Inflation to bring it back to a milder 2% has strengthened the dollar following systematic bullish interventions on interest rates.
“A more aggressive Fed, which implies higher real interest rates and a stronger US dollar, both indicate falling gold prices.”
This is the opinion of Przemyslaw Radomski, CEO of investment advisory firm Sunshine Profits.
Dhwani Mehta of fxstreet.com, on the other hand, believes that the gold price has not yet bottomed out.
“If sellers find a solid base below the latter, a strong sell-off towards the one-day S3 pivot point at $ 1,688 will be inevitable.”
Also of Metha’s opinion is David Meger, director of metals trading at High Ridge Futures, who states.
“There is continued pressure on gold from Powell’s comments last week that raised [the] expectation of a more aggressive Fed. Gold being a non-interest bearing asset will have more competition.”
Meanwhile, the U.S. dollar on Thursday hit its highest in 20 years coming in at 109.59 a figure that scares not only investors but also countries across the Atlantic Ocean.