Hawkish Fed Keeps Pressure on Gold Though Prices Halt Their Slide

Expectations that the U.S. Federal Reserve will keep benchmark interest rates in the country higher are putting increased pressure on gold prices. Although gold prices stopped their decline last week, pressure from a hawkish Fed has kept prices at a seven-month low as investor interest in the precious metal reduced.

Spot gold prices went up by only 0.1% to $1,824.79 an ounce at noon last Wednesday, ending a seven-day decline that had seen gold prices drop by 2.1% in a week. Conversely, U.S. gold futures saw their prices fall by 0.1% to $1,839.50 per ounce while the benchmark U.S. 10-year bond yield soared to a 16-year peak, thanks to gains from nonyielding assets such as gold bullion.

Gold has traditionally acted as a store of value during downturns and attracted the attention of investors looking to protect their holdings from depreciation. However, even though global economic conditions have been poor for the past couple of years, action by the U.S. Federal Reserve has limited investor interest in the precious metal and kept prices from soaring.

The Fed has raised benchmark interest rates for several consecutive months to arrest inflation in the country, increasing consumer interest in assets that pay interest and reducing the overall investment in gold. RJO Futures senior market strategist Bob Haberkorn notes that if the Fed keeps interest rates at current levels, gold prices will remain under pressure and may even dip to $1,750 per ounce.

Some of the price pressure on gold was eased when U.S. data revealed that private payrolls in the nation had increased less than predicted last month. America’s service sector also experienced slowdowns through September, but the industry has maintained a pace that is in line for solid economic growth in Q3 2023.

While gold also saw the pressure on its prices ease due to a slightly weaker dollar, with the greenback dropping by 0.2% on Wednesday, the precious metal’s fate now depends on the upcoming non-farm payrolls report. The key report will help inform the Fed’s decision on whether or not to keep interest rates at current levels or increase or reduce them; the action could allow gold prices to rally from their nearly seven-month low.

Lower interest rates will likely reduce the pressure on gold prices and lower the financial incentive for investors to invest in interest-paying assets; they may even increase investor demand for gold.

In the long run, gold has always been a good investment, so the current dip in price is likely to be regarded as a mere blip on the radars of extraction companies such as Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF).

NOTE TO INVESTORS: The latest news and updates relating to Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are available in the company’s newsroom at http://ibn.fm/ELRRF

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