Gold Prices On The Decline After Hawkish FOMC Statement

SEATTLE (Scrap Monster): The gold prices recorded notable decline following the hawkish tone among the Federal Open Market Committee (FOMC) members. The prices of the yellow metal were seen heading for the biggest weekly decline in almost fifteen months during the week.

James Bullard, St. Lious Fed President, after two-day policy meeting, had stated that high inflation rates may force the U.S. central bank to tighten its monetary policy over the next year. The higher rates are likely to impact the demand for gold as an alternative asset. It may be inappropriate for the Fed to start raising interest rates next year.

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Gold Rallied on Inflation Concerns, Reversing Its Recent Trend

The FOMC members forecast U.S. policy rate of 0.6% at the end of 2023, higher than 0.5% projected at end-March this year. The U.S. central bankers expect two quarter-point interest rate hikes to happen in 2023, which in turn will be negative for gold.

The hawkish Fed stance has strengthened the U.S. dollar, thus creating downward pressure on gold prices. However, the possibilities if no rate hikes during 2021 and 2022 are likely to augur well for gold in the near term.

Commenting on the outlook for gold, Macquarie Group noted possibilities of gold struggling to return to a bull market. It predicts dip in gold prices during the year, with prices expected to touch $1,600 per Oz by end-2021. Commerzbank AG too noted that gold prices may struggle to record a quick recovery.