[Phone] International gold prices have fallen significantly in recent days, by more than 2 per cent, driven by the expected renewed warming of the market against the interest rate hike of the United States Federal Reserve. Many financial and economic media outlets have reported that high rates of return on national debt and "higher and longer" interest rates are expected to suppress the attractiveness of gold as an interest-free asset. It has been reported that the impasse in the Strait of Hormuz continues to push up the market's interest rate premium, which is an important background for the price of the current round.
In terms of market performance, there is widespread interest in the price range that gold prices have touched during this decline. Based on real-time data from multiple platforms, the price run range for spot gold in this round fluctuates between $4063 and $4411 per ounce. It is worth noting that, just recently, the gold price had touched a 52-week high of $5589, which was a sharp fall compared to the current price. The 52-week low point is $3616, and the current price is still in the upper middle of the zone, but it is significantly higher than in the year. The headline of media reports directly points to the logic of the market - "The price of the gold falls because the Fed is expected to maintain higher interest rates for longer." This suggests that investors are re-pricing the Fed's monetary policy path.
The specific transmission chain that fell on this round is clearer. The expected rise in the Fed's interest rate hike means that the United States government debt yields are high, while the holding costs of gold, as an asset without interest, are relatively high, resulting in a shift from gold to more attractive fixed-income products. It was noted that high rates of return on national debt had kept buyers of spot gold in a position where market buying power had diminished. Media reports further indicate that the next round of gold price increases faces resistance, with rising yields and expected interest rate hikes as major obstacles.
In terms of geopolitical dimensions, there are reports that the impasse in the Strait of Hormuz has been cited as a key variable in sustaining the expected high interest rate hike. The strait, which is the backbone of global energy transport, is strained by higher energy price expectations, which in turn exacerbates inflationary concerns and leads markets to see the need for the Fed to maintain interest rates at higher levels for longer periods in order to contain inflation. This logical chain doubles the price of gold: it increases the opportunity cost of holding gold and weakens its attractiveness as an inflationary hedge, as interest rates rise in themselves to counter inflation.
The real impact of the fall in the price of the round is concentrated in the following categories. First are spot gold buyers and bulk investors, who are significantly less willing to buy gold in a high-yield environment, as analysed as "buyers are on guard". The second is the gold ETF holder and the precious metals portfolio manager, whose net asset value is directly affected by a significant reversal in the short term. For gold mining companies, the fall in gold prices has reduced the margin of profit, although it is not clear whether any large mining companies have made significant operational adjustments in this volatility. In addition, institutional investors involved in gold futures and options transactions need to pay close attention to anticipated further changes in interest rates, as this directly determines the way forward for gold prices.
In terms of timing, data show that, as at 18 September, the spot price of gold was approximately $4378 per ounce, after which the market experienced a new wave of fluctuations. The differences in gold prices shown by different data sources reflect the characteristics of round-the-clock trading in the global gold market and the differences in the timing of data collection between different price platforms. It is noteworthy that some of the platform data show a slight rebound in gold prices following a decline, such as a data source showing a change of about 0.4 per cent in the price of gold in the day, suggesting that there may be some technical rebound demand in the market after digesting the expectation of interest rate hikes.
Looking ahead, market participants need to focus on several variables. The first is the policy signal of the next US Federal Reserve interest conference, and any change in language on the interest-rate path could trigger sharp price fluctuations. The second is the direction of the return on the United States Treasury debt, particularly whether it continues to climb in the medium to long term, which will directly determine the relative attractiveness of gold. The third is the development of the situation in the Strait of Hormuz, which supports the price of gold by reducing geo-stabilized tensions and lowering expectations of inflation, which could also be accompanied by higher expectations. Fourth is the movement of global central banks’ gold reserves, which have continued to grow in recent years, a structural demand that underpins gold prices.
For ordinary investors, the price of gold is currently in a more complex game zone. On the one hand, the return to the 52-week high has been considerable, partly at a time when low buyers may consider the current price to be of assigned value; on the other hand, the expectation of higher interest rates has not receded and the price of gold continues to be under pressure from higher rates of return. Until the Fed’s policy path is clear, the price profile will maintain a shock pattern, and investors should focus on key economic data dissemination and Fed officials’ statements to avoid over-leveraging in situations where direction is unclear.