Hawkish Fed, High Inflation Put Gold At A Crossroads – Investing.com

Hawkish Fed, High Inflation Put Gold At A Crossroads – Investing.com

Gold has been trading sideways recently, but this won’t last forever. The yellow metal is likely to move downward before continuing its rise.

So you think you can tell heaven from hell, a bull market from a bear market? It’s not so easy, as gold seems to be at a crossroads. On the one hand, accelerating inflation should take gold higher, especially that the real interest rates stay well below zero. On the other hand, a hawkish Fed should send the yellow metal lower, as it would boost the expectations of higher bond yields. The Fed’s tightening cycle increases the interest rates and strengthens the U.S. dollar, creating downward pressure on gold.

However, is neither soaring nor plunging. Instead, it seems to be in a sideways trend. Indeed, as the chart below shows, gold has been moving in a trading zone of $1,700-$1,900 since September 2020.