US interest rate hikes continuing gold downtrend

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Long Samnang, business manager at PPLS

The price of gold has continued in a downtrend fuelled by a stronger US dollar supported by interest rate hikes to tackle rising inflation.

“Consecutive interest rate hikes in 2022, even more than its basic 0.25 phase, have kept the US currency as still the favourite derivatives product for traders to keep track of and get benefit from,” said PP Link Securities business manager Long Samnang.

 

According to the Federal Open Market Committee (FOMC) statement issued by the Federal Reserve on September 21, the target range of the federal funds rate is now 3.25 per cent from three per cent.

The statement said the purpose of raising interest rates was to promote maximum employment, with a long-term inflation target of two per cent, far off the 8.3 per cent in August.

Such support for the dollar would cause gold to disappreciate in the long run, Samnang added.

Investing.com’s Ambar Warrick reported: “Gold and copper prices retreated further on Monday as the dollar notched a new 20-year high amid growing fears of rising interest rates and a potential recession.

“Metal markets plummeted last week after the US Federal Reserve hiked interest rates and warned of potential economic pain as it looks to combat runaway inflation.

“Economic indicators from the Eurozone and the UK also showed a pronounced contraction in business activity, ramping up fears of a recession and denting the demand outlook for metal markets.”

 

As well as these fundamental indicators, technical analysis based on one-hour and four-hour chat views is still showing a downward pattern for gold.

Therefore, for this week’s trading recommendation, market expert Samnang advises traders to sell the precious yellow metal accordingly.

Alternatively, traders could wait to buy gold when the price is between $1,610 to $1,620 per ounce, setting the take-profit function at $1,645 per ounce and the stop-loss at $1,597.

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