Last week, the price of gold dropped below the $1,800 level as the U.S. bond yields and the dollar rose, with expectations that rates of interest will increase in 2022. This came after Jerome Powell, the current chair of the U.S. Federal Reserve, was renominated for a second term, which adds to confidence that the United States Central Bank may increase interest rates.
The price of spot gold also dropped by a little more than 1% to reach $1,783.82 per ounce, which is its lowest price in almost three weeks. In New York, U.S. gold futures declined by 1.2% to trade at $1,784 per ounce.
In an interview, Carsten Menke, an analyst at Julius Baer, stated that the gold market had wagered that Lael Brainard would be the next chair of the Federal Reserve because she was considered to be more dovish than its current chair with regard to stimulating the economy longer or monetary policy. Menke added that gold selling for less than $1,800 could put more pressure on investors to sell the precious metal. Investors wager that the renominated chair may choose to increase the pace at which the Federal Reserve is normalizing monetary policy in order to tackle the rising consumer prices.
Despite gold being considered as a hedge against various uncertainties as well as inflation, a hike in interest rates would increase the opportunity cost of holding non-interest-yielding bullion. This would in turn make the metal more expensive for holders, prompting more investors to sell the metal.
In a note, OANDA senior market analyst Jeffrey Halley stated that a move higher in longer-term U.S. yields would probably derail gold’s rally. However, an independent analyst Ross Norman noted that it was still too early to write off the precious metal, given the coronavirus restrictions imposed in Europe. Norman also explained that the burden was on the bulls to garner support for the metal and prove their case, adding that failure to do so would cause the price of the metal to fall even lower.
Elsewhere, the price of palladium dropped to $1,941.05 while that of platinum declined by more than 1.5% to hit $994.97. The price of silver also dropped by a little more than 1.5%, to reach $23.78 per ounce. Oil was also affected, with the price of crude oil in the United States dropped by more than 5.5% to hit $74.06. Over in Europe, Brent crude also declined by 5%, hitting $78.14 per barrel.
The price movements triggered by the sentiments surrounding who will or will not head the Fed isn’t as significant for precious metals companies such as Asia Broadband Inc. (OTC: AABB) given that these metals have historically held steady through the different storms that occur.
NOTE TO INVESTORS: The latest news and updates relating to Asia Broadband Inc. (OTC: AABB) are available in the company’s newsroom at https://ibn.fm/AABB
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