Gold prices (XAU/USD) rebounded on Friday on risk-off sentiment, shrugging off the rise in U.S. Treasury yields ahead of a key FOMC gathering in the coming days. In late morning trading, bullion was up about 0.75% to $1,925 as equity indices took a nosedive, with the Nasdaq 100 down nearly 1% amid widespread weakness in the technology sector.
Despite today's move, the precious metal's advance may be temporary, especially if the Federal Reserve embraces a hawkish position at its September meeting. The U.S. central bank is expected to keep interest rates unchanged next week, but could leave the door open to additional monetary tightening this year and signal that monetary policy will stay restrictive for an extended period.
With the U.S. economy displaying remarkable resilience, as demonstrated by recent data, the Fed should remain vigilant. Prematurely declaring victory could ease financial conditions dramatically, endangering the progress made on the inflation front thus far. Policymakers are likely aware of this, and as a result, may lean towards a higher-for-longer stance and maximum optionality – a negative outcome for gold.
Despite today's move, the precious metal's advance may be temporary, especially if the Federal Reserve embraces a hawkish position at its September meeting. The U.S. central bank is expected to keep interest rates unchanged next week, but could leave the door open to additional monetary tightening this year and signal that monetary policy will stay restrictive for an extended period.
With the U.S. economy displaying remarkable resilience, as demonstrated by recent data, the Fed should remain vigilant. Prematurely declaring victory could ease financial conditions dramatically, endangering the progress made on the inflation front thus far. Policymakers are likely aware of this, and as a result, may lean towards a higher-for-longer stance and maximum optionality – a negative outcome for gold.
Tradewithlogic