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Gold Price Rebounds Amid Hawkish Fed




  • Thursday Lows Recovered as Caution Remains 
  • Fed Approach and Rate Hikes in Focus
  • Attention Switches to NFP Data

Commodities news starts 2022 with pressure on the price of gold and other precious metals. Gold prices fell to an almost two-week low in trading on Thursday as traders remained cautious in a market that has experienced little else to start the year. A more hawkish tone from the Fed sparked the move against gold and in other areas though the price was able to rebound ahead of Friday. The focus will now turn to the important employment numbers to come in the US and UK. These will set the course for precious metals in the following week. 

Bounce Back as Gold Prices Remain Tentative

The price of gold hit an almost 2-week low at $1785 on Thursday as the traditional safe haven dropped back following the release of the Fed meeting minutes. These shook up more than the commodities market with stocks also selling off after the news. Prices of the precious metal though recovered enough to finish the day close to the important psychological benchmark of $1800. 

Despite this recovery, analysts and traders in the market alike remain cautious of the next move in gold. The driving factor behind the move downward was the more hawkish than expected news from the Federal Reserve. While this may now be priced in, it does not change the fact that an environment of rising Treasury yields and a strengthening US Dollar is not good for the price of gold or other precious metals.

Rate Hike Concern Remains Key Issue

The prospect of rate hikes from the Fed has long been known and discussed. These are now certainly going to happen over the next year, but the continuingly cautious tone from Jerome Powell and other key policymakers has introduced a feeling of concern around just how many rate hikes there are likely to be in the coming period. This feeling is reflected particularly in US Treasury Yields. 

Yields on the 10-year rose to their highest level since April 2021 yesterday which was a major contributor to the dropping of gold prices. Increased yields typically work to make precious metals like gold and others, a less attractive investment. This figure dipped slightly at the end of the day to now stay at 1.73%.

NFP is Next Big Mover

For gold, other precious metals, and other markets, the main figures of the day on Friday will come courtesy of the Department of Labor. A strong number, as is expected from employment figures in December, would simply reinforce the moves made by the Fed, and likely spell further turbulence for gold prices and others. 

Analysts have forecast that 422,000 jobs were added in the month of December. Despite the surge in omicron variant cases, this would mark a number double that of the November figure. The unemployment rate meanwhile is expected to move by 0.1% to 4.1%.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.