World Gold Prices Slumped After The Fed Chair's Statement About The Increase In Interest Rates

Price of gold (photo: dock. Unsplash)

JAKARTA - The price of gold slumped again at the end of trading Friday, August 25 New York time. This fall was for the second session in a row, as the US dollar strengthened.

The strengthening of the US dollar is in line with the increase in government bond returns after Federal Reserve Chairman Jerome Powell allowed a possible further interest rate hike this year.

Citing Antara, the most active gold contract for December delivery in the Comex New York Exchange division, fell 7.20 US dollars or 0.37 percent to close at 1,939.90 US dollars per ounce, after touching the highest session at 1,950.40 US dollars and the lowest at 1,931.00 US dollars.

Gold futures slipped 1.00 US dollars or 0.05 percent to 1,947.10 US dollars on Thursday (24/8/2023), after jumping 22.10 US dollars or 1.15 percent to 1,948.10 US dollars on Wednesday (23/8/2023), and rose 3.00 US dollars or 0.16 percent to 1,926.00 US dollars on Tuesday (22/8/2023).

However, his decline on Friday (25/8/2023) did not stop the price of gold to record his first weekly rise after four consecutive weeks of decline.

US government bond yields 10-years rose 4 basis points to 4.274 percent and a US dollar index measuring greenback power against other major currencies, trading up 0.1 percent in 104.08, following Powell's statement.

Fed chair in a speech at the Jackson Hole Economics Symposium in Wyoming state, USA on Friday (25/8/2023), acknowledged persistent inflation, hinting that further interest rate hikes are not impossible. The Federal Reserve intends to maintain policies at a restrictive level until they believe inflation is moving down sustainably towards a 2.0 percent target..

Powell looked at "short" economic data and said he would proceed with caution.

The comments increased the possibility of rising interest rates at the next Federal Open Market Committee (FOMC) meeting in September, weakening gold prices.

Joining the Squawk on the Street discussion, Federal Reserve President Clevelandwaste Mester on Friday (25/8/2023) noted that core inflation is still too high, staying above 4.0 percent, "we may still have a lot of work to do."

The Consumer Sentiment Index released on Friday (25/8/2023) by the University of Michigan (UM) Consumer Survey fell to 69.5 in the August 2023 survey, from 71.6 in July and above 58.2 in August last year.

"Golds are experiencing small recovery this week but are still tentative and unless the Fed's narrative changes, or we see significant improvements in inflationary data (or a decline in labor market figures and other data), then the central bank may find it difficult to generate a lot of momentum in a positive direction," Craig Erlam of OANDA said in a note to clients.

Powell's comments did not calm the minds of traders and traders being increasingly forced to receive interest rates that remained higher for a longer time, thereby amplifying the dollar and returning to the burden of gold today.

Another precious metal, silver for September delivery rose 0.40 cents, or 0.02 percent, to close at 24.234 dollars an ounce. Platinum for October delivery added 5.20 dollars, or 0.55 percent, to settle at 948.20 dollars an ounce.