Gold has long been a commodity for understanding market volatility. The gold price remains at his eight-month high, rising 14% since late November to reach $1,882 an ounce on Wednesday. Precious metals are often seen as a hedge against rising consumer prices, but rate hikes could dampen inflationary pressures and make non-yielding gold less attractive.
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Analysts at Emirates NBD said: “Broader financial market expectations that the Federal Reserve will need to withdraw its aggressive monetary tightening continue to rise, even though Fed speakers have yet to show any signs of a turnaround. , are helping to support the gold market.”
That said, the World Gold Council says gold generally performs well during recessions, with positive returns five of the last seven. It is becoming clear that the Fed will not cut interest rates to combat high inflation.
In addition, other countries continue to add gold to increase demand.A weaker US dollar makes it easier to buy goods outside the US
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Given the actual reaction of the gold price to rising interest rates, the price could be adversely affected by rising interest rates. Demand for gold is said to remain strong. Gold is unlikely to rise to higher levels, however, in scenarios where the dollar rises significantly. Easing central bank rate hikes could benefit them, but it could still take time.
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This article originally appeared on GOBankingRates.com: Is gold worth investing in as Federal Reserve rate hikes keep commodity prices low?