World gold prices turned up in the afternoon trading session of September 17 when the USD weakened, oil prices cooled down and investors adjusted their positions after initial reactions to the US Federal Reserve (Fed)'s decision to raise interest rates.
By 3:48 PM on September 17 (Vietnam time), spot gold prices increased by 1.2% to 4,312.05 USD/ounce, recovering after falling to a nearly 6-week low in the previous session. Meanwhile, US gold futures for December delivery fell 0.8% to 4,351 USD/ounce.
Market "relieved" after Fed interest rate hike information
Immediately after the Fed's announcement, gold prices faced downward pressure as the USD rose sharply and US bond yields rose. Maintaining high interest rates is often detrimental to gold because this precious metal does not generate cash flow like profitable assets.
However, after the initial reaction, the market quickly reversed direction. The reason is that the Fed's decision to raise interest rates did not create a major surprise as this possibility was prepared in advance by investors.
Part of the previous cash flow betting on the scenario of the Fed continuing to maintain tight policy has been adjusted after the official information was announced. When selling pressure decreased, buying power for gold returned, helping precious metal prices recover.
In addition, the Fed's message shows that the fight against inflation is not over yet. Maintaining high interest rates may slow economic growth, while not necessarily immediately addressing price pressures from energy costs and supply fluctuations.
USD weakens, gold regains its appeal
One of the important factors supporting gold prices is the cooling down of the USD after rising to its highest level in many weeks.
Gold is valued in USD, so when the greenback weakens, the precious metal becomes more attractive to investors holding other currencies. This contributes to boosting buying demand in the international market.
Along with that, US bond yields also no longer maintained the strong upward momentum as immediately after the Fed's announcement. When profits from interest-bearing assets decreased in relative attractiveness, gold had more room for recovery.
However, the high interest rate environment is still a barrier to the long-term upward trend of gold. If the Fed continues to send tough signals and the USD recovers, gold prices may face further adjustment pressure.
Geopolitical instability continues to support shelter needs
In addition to factors related to monetary policy, unstable developments in the world are still an important support for gold.
Concerns about geopolitical conflicts, the risk of energy supply disruptions and impacts on inflation have led a part of investors to continue to turn to gold as a defensive asset.
Meanwhile, oil prices show signs of cooling down after a period of strong increase. The market's reduced concern about the risk of energy supply disruption helps reduce inflationary pressure, while changing expectations about the monetary policy roadmap of central banks.
Not only gold, other precious metals also recorded an increase. Spot silver price increased by 1.4%, to 63.83 USD/ounce. Platinum price increased by 1.2%, reaching 1,772.19 USD/ounce, while palladium increased by 1.8%, to 1,291.89 USD/ounce.
Current developments show that the gold market is in a period of tug-of-war between two forces. One is pressure from the Fed's high interest rate policy, the other is the need to defend against economic and geopolitical instability.
In the short term, the diễn biến of the USD, US bond yields and new signals from the Fed will continue to be decisive factors in the direction of gold prices.
Update on domestic gold prices
The article only updates the developments of the gold market and factors affecting the price of precious metals, not investment recommendations.
