Two or three more Fed rate hikes already priced into the gold price

May 25, 2018

Washington  (May 25)  Mitsubishi said more Federal Reserve rate hikes are likely already factored into gold prices and the market potentially could get a lift on any downdraft in equities.

 The recent move below $1,300 represents the most significant test of gold’s strong 2018 performance – gold’s year-to-date average price is $1,326, the highest since 2013.

 Whether gold turns higher and establishes a solid base of support above $1,300 once again will depend on the strength of the dollar and whether inflation keeps track of the rally in 10-year yields, maintaining a favorable real rate environment for gold.

 While there may be some short-term headwinds for gold from next month’s likely Fed rate hike, particularly if the revised economic projections present a more hawkish scenario, however we believe two or three more rate hikes this year are already priced into gold, Mitsubishi added.

 Meanwhile, Mitsubishi said, there is potential for gold to get a tailwind from risk aversion from the U.S. stock market.

 Analysts commented that the sugar rush of corporate tax cuts is already factored into share prices, and record earnings have failed to drive the S&P to fresh highs for the year.


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