On Wednesday (August 3), international gold prices rose as tense geopolitical tensions offset pressure from rising U.S. Treasury yields after Fed officials made hawkish remarks about raising interest rates. Market sentiment remains fragile amid growing fears of a global recession.
At 15:40 Beijing time, spot gold rose 0.36% to US$1,766.68 per ounce; the US dollar index fell 0.15% to 106.164.
DailyFX FX Strategist Ilya Spivak said: “Gold tested $1,785-$1,790 range resistance overnight, but was unsuccessful... The market has become more skeptical of the Fed’s reversal of monetary policy tightening. Also, gold does indeed trade at a time of geopolitical tensions. There tends to be a little bit of appeal.”
Three Fed policymakers said on Tuesday (August 2) that they will not ease tightening policy aimed at curbing inflation at the highest level since the 1980s, even though it would bring interest rates to levels that would more significantly dampen economic activity.
St. Louis Fed President Bullard said the Fed was able to achieve a "relatively soft landing" to avoid a severe recession due to high borrowing costs, "The Fed appears to be able to push deflation methodically because modern central banks are more credible than they were in the 1970s. , achieve a relatively soft economic landing.”
Cleveland Fed President Mester discussed the Fed's plan to curb inflation and the worrying prospect of a recession with a reporter from The Washington Post. She said U.S. economic growth will be below trend this year and the Fed's policy model must be "used with caution."
But Mester reiterated that U.S. inflation has not cooled at all and the Fed is committed to controlling it. And the U.S. economy isn’t in recession, the U.S. labor market isn’t slowing, and it looks very healthy right now.
San Francisco Fed President Daly said she is watching upcoming data to determine whether the Fed can slow the pace of rate hikes or continue at the current pace. “It would be a mistake to be overconfident that we have solved the problem. My prediction is that we will raise interest rates for a while. The fight against inflation is far from done and we still have a long way to go in terms of price stability. To go, we remain steadfast and fully united."
However, risk aversion should continue to provide some support for gold ahead of Friday's (August 5) U.S. nonfarm payrolls report for July. Investors, therefore, would be prudent to wait for another strong sell-off to follow before confirming whether gold's recent rally from a July 2021 low of $1,680.79 hit in July has run out of steam.