Gold is so unloved it is becoming immune to Fed's oversized rate hikes - MKS' Shiels
NEW YORK (Sept 23) The gold market shows relative strength in the face of rising interest rates and a U.S. dollar that continues to trade near its highest level since 2002. Now could be a tactical time to buy gold, according to one market analyst.
In her latest research note, Nicky Shiels, head of metals strategy at MKS PAMP, said that rising economic risks is helping gold find a solid floor around $1,660, even as the Federal Reserve is maintaining its aggressive monetary policy stance as it lowers its growth outlook.
Wednesday, after raising interest rates by another 75 basis points, economic projections from the U.S. central bank signaled that the federal funds rate will peak around 4.6% in 2023. Although interest rates are expected to rise, the Federal Reserve lowered its growth forecasts, forecasting the U.S. economy will grow 0.2% this year and 1.2%, down from June's projections.
During the press conference, Powell warned consumers economic pain is on the horizon as the central bank focus on bringing inflation down.
#Powell on aggressive rate hikes: No one knows if this process will lead to a recession or how significant this recession will be. It depends on how quickly price pressures come down and if we get labor supply. Failure to restore price stability would mean greater pain. #FED pic.twitter.com/tEKFWPwsVJ
— Kitco NEWS (@KitcoNewsNOW) September 21, 2022
"Gold made new weekly lows and then highs (after Powell's presser) in just 45 minutes; something that hasn't happened on FOMC day in a while," Shiels said in the note. "Powell was neither hawkish nor dovish, but gloomy; there will be further pain and a soft landing is increasingly unlikely. Not to mention the pace of Fed hikes clearly indicates a clear policy mistake on inflation."
Shiels added that bearish speculative positioning could also now be working in gold's favor as the precious metal has been unloved, seeing continuous solid selling through most of the summer. She noted that gold had been so beat up that it is becoming more immune to the Federal Reserve's oversized rate hikes.
Shiels pointed out that the Sept. 20 headline from the Wall Street Journal, saying "Gold loses Status as Haven," indicates how acerbic the mood is among gold investors.
KITCO
