Analyst sees spot gold possibly testing $3,900 on US rate hike expectations
US inflation in September has strengthened market expectations of a Federal Reserve rate hike in December, with futures markets pricing in a 75 per cent probability. An analyst predicts spot gold may test $3,900 per ounce by year-end, though upside is capped at $4,300.
US inflation in September has fuelled market expectations that the Federal Reserve will raise interest rates in December, according to an analyst. Futures markets currently assign a 75 per cent probability to a December rate increase, a factor that is weighing on gold prices, with spot gold hovering around the $4,000-per-ounce mark.
Chang Keung Sang, managing director of Zheng Capital, agreed that a US rate increase in December is highly likely. However, he noted that Asian exchange-traded funds have been actively accumulating gold in the second half of this year. He added that prices below $4,000 per ounce tend to attract central banks and other investors to increase their holdings, which he believes limits further downside.
Against the backdrop of rate hike expectations, Chang said spot gold may test $3,900 per ounce before the end of the year. Even if it rebounds, he expects it to be capped at $4,300.
Chang said that with the US midterm elections approaching, many fund managers are adopting a wait-and-see approach. He suggested that once the election results are announced next week, the gold market could experience short-term volatility, but that interest rate trends remain the key factor.