Gold goes down as interest rates rise and dollar strengthens

On Friday, a rise in gold prices was registered, linked to a decrease of the dollar. Nevertheless, prices of the yellow metal might start falling too, as the hints given by the U.S. central bank implies further rate hikes.

According to a note by Firch Solutions, a possibility of a recession coming stimulates the growth of gold, as well as the U.S. national currency peaking.

At the same time, as it was mentioned, a number of factors put pressure on the precious metal. Improving prospects regarding Chinese economy and a still persistent chance of the Fed continuing tightening its monetary policy more aggressively than it is currently expected are among such factors, as well as the inflation peak reached in the third quarter.

The dollar index, while playing a similar role as a safe haven asset and being a rival for gold in this regard, has recently gone down, allowing gold some recovery for the precious metal and making it more affordable for the foreign buyers.

At the current moment, as it was reported by Reuters, market participants consider there’s an 87% chance of the Fed to hike their rate by 50 basis points in December. After four subsequent hikes by 75 points, this will become the first instance of the Fed slowing down its pace of monetary tightening.

It’s also necessary to note that higher interest rates pose difficulties for investing in gold, which doesn’t earn any interest.

The latest jump in gold prices is linked to a forecasted slowdown in pace of the Fed’s interest rate increases after several months of consistent monetary tightening and respective fall in bullion prices. However, analysts state that institutional investors remain cautious, as there might be no further growth.