Gold Price Declines as Fed Waller Maintains a Hawkish Stance on Interest Rates
The price of gold (XAU/USD) has fallen sharply as Federal Reserve Governor Christopher Waller continues to support the idea of keeping interest rates higher for a longer period. This comes as the last leg of high US inflation has proven to be stubborn, causing uncertainty in the market.
The recent strong retail sales data reported by the United States Census Bureau for December has eased the possibility of an interest rate cut by the Fed in March. Retail sales at stores were significantly higher than expected, which has resulted in less pressure for the Fed to consider lowering interest rates.
Waller’s hawkish commentary has cast doubts on the possibility of a rate cut in the upcoming Fed meeting. He emphasized the importance of not rushing to lower interest rates until inflation returns to the 2% target in a sustainable manner.
The recent data on consumer price index (CPI) for December has also presented challenges for Fed policymakers, as high price pressures persist due to steady labor market conditions and strong consumer spending momentum.
The performance of the US dollar, treasury yields, and bullions will continue to be influenced by the upcoming industrial production data for December, as well as the outlook on interest rates from Fed speakers.
Additional Insight:
Despite the decline in gold prices, the market remains uncertain about the Federal Reserve’s future actions regarding interest rates. Waller’s comments have made investors more cautious, leading to a strengthened downside bias for the price of gold. Furthermore, the relationship between the US dollar and gold prices continues to play a major role in determining market movements.
Technical Analysis:
From a technical standpoint, gold prices are struggling to sustain above the 50-day EMA, indicating bearish momentum as the 14-day RSI declines towards 40.00. These technical indicators suggest that further downside pressure may be expected in the near term.
The Role of Gold:
The article also provides insights into the significance of gold as a safe-haven asset and its inverse correlation with the US dollar and US treasuries. It highlights the factors that impact gold prices, such as geopolitical instability, economic recession fears, and interest rate movements, emphasizing the pivotal role of the US dollar in influencing gold prices.
Central Banks and Gold Reserves:
The role of central banks as the largest holders of gold, and the recent increase in gold reserves, is also highlighted, demonstrating the strategic importance of gold in the current economic landscape.
In conclusion, the article provides a comprehensive overview of the factors influencing the price of gold and the ongoing debate surrounding the Federal Reserve’s interest rate policies, offering valuable insights for investors and market participants.
