① What did the minutes of the Federal Reserve's May meeting mention? ② Why did the decline in interest rate cut expectations trigger a pullback in gold prices? ③ What do you think of the subsequent gold price?
Financial Services Association, May 23 (Editor: Hu Jiarong) International gold prices continue to fall due to the slowdown in expectations of the Federal Reserve's interest rate cuts. Affected by this news, Hong Kong gold stocks fell again today. As of press release,$LINGBAO GOLD (03330.HK)$fell 5.29%,$ZHAOJIN MINING (01818.HK)$fell 4.08%,$ZIJIN MINING (02899.HK)$It fell 2.65%.
According to the latest minutes of the US Federal Reserve's May meeting, Fed officials generally stated at the last policy meeting that if the inflation data continues to disappoint, interest rates may remain high for a longer period of time, while some policy makers have even discussed their intention to raise interest rates further when needed.
The minutes also showed that although participants believed that the current monetary policy was “well positioned,” many officials mentioned their intention to further tighten the policy if necessary. These officials said that once the risk of inflation becomes a reality, it is appropriate to further tighten policies, they are willing to act in this way.
Before the Federal Reserve released the minutes of the latest meeting, Goldman Sachs Group CEO David Solomon said that he currently does not expect the Fed to cut interest rates this year because the US economy is more resilient, driven by government spending.
Affected by this news, international gold prices continued to decline, falling to 2366.8 US dollars during the intraday period. At press time, it was down 0.38% to $2369.66.
Why did the decline in interest rate cut expectations trigger a pullback in gold prices?
There is a certain negative correlation between gold prices and interest rates. When expectations of interest rate cuts heat up, it means that the purchasing power of the currency may decline in the future, thereby boosting the appeal of gold as a safe-haven asset, and the price of gold rises as a result. Conversely, when expectations of interest rate cuts slow down, the market believes that the risk of a decline in the purchasing power of the currency is reduced, and safe-haven demand for gold is reduced, leading to a correction in gold prices
Agencies say gold prices are still expected to strengthen in the future
According to Guojin Securities, the growth rate of domestic gold stocks will slow down in 2023. It is expected that in 2024, when gold prices rise and cost control is relatively stable, the performance of gold stocks will perform well, and the current market value does not reflect many expectations of rising gold prices, and there is plenty of room to “make up”, so it is expected to usher in a major upward trend.
Société Générale also pointed out that geopolitical risks in the Middle East have led to stronger gold prices. Geopolitical danger is a sign of a breakdown in trust between the two sides. Beginning with the 2008 global financial crisis, people's confidence in the US dollar waned. This is not an overnight problem, nor can a solution be achieved overnight. As a result, gold has the basic conditions to rise.
Editor/jayden