Amidst Rising Inflation Concerns And Gold Consolidates Amid Hawkish Central Bank Actions

In the ever-evolving landscape of financial markets, decisions made by major central banks have a significant impact on shaping trends. We recently had the opportunity to speak with Matthew Weller, an analyst at StoneX, to gain insights into the current state of affairs.

The European Central Bank (ECB) recently made headlines with its "Hawkish Hike," raising its key interest rate by 25 basis points to 3.5%. This move aims to combat the escalating inflation in the eurozone, marking the eighth consecutive rate hike since July 2022. The ECB's determination to bring inflation down from its current 6.1% to its target of 2% is evident. ECB President Christine Lagarde has hinted at the possibility of further rate hikes at the next meeting in July, emphasizing the need to tackle inflation head-on. Lagarde made it clear that the ECB has no plans to pause its rate hikes.

While the ECB focuses on inflation control, other central banks, such as the US Federal Reserve, have taken a pause in their rate hikes to assess their impact on economic growth and employment. However, the Fed's projections indicate the potential for two more rate hikes this year. Similarly, central banks in Australia and Canada have resumed rate increases after a temporary pause, underscoring the global challenge of high inflation.

The ECB's decision to raise rates comes at a time of economic uncertainty, influenced by factors such as the ongoing conflict between Russia and Ukraine and potential wage agreements that may further fuel inflationary pressures. The ECB acknowledges that short-term economic growth may remain subdued, but it expects improvements as inflation subsides and supply disruptions ease. While concerns persist regarding the potential negative impact of higher rates on the economy and the risk of a recession, the ECB remains committed to addressing inflation as a top priority

FXMAG.COM: Could you give as your point of view about how the gold prices would behave in next weeks? Is there a chance that there will be new ATH?

Gold Consolidates Amid Hawkish Central Bank Actions

With major central banks continuing to tighten monetary policy and inflation still receding (if more gradually than before) gold prices are likely to remain on the back foot in the near term.

As of writing, the yellow metal is trading in the mid-$1900s, where it has spent the last three weeks consolidating. Bulls will be looking for a break above the June high near $1990 to signal a potential retest of the record highs near $2075 as we move into July, whereas a confirmed break below $1930 could open the door for a retest of the 200-day EMA near $1900 next.

Matt Weller CFA

Matt Weller is the Global Head of Market Research for FOREX.com and City Index. Matt produces regular research reports and videos on the forex, equity, and commodity markets. In his research, Matt utilises a fusion of fundamental, technical, and sentiment analysis to anticipate potential market moves.

In addition to his regular research reports, he has discovered a passion for teaching others about trading and has conducted over 1,300 educational webinars on different aspects of trading and trading psychology.

His analysis is regularly featured in the Financial Times, Reuters, MarketWatch, and the Wall Street Journal. Matt holds both his Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT) charters.

Follow the author on:

Twitter