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Gold prices had their worst week in more than a year, falling 6.04% as the Fed’s hawkish stance spurred a new wave of concerns about tapering.
The June FOMC meeting forecasts signaled that two rate hikes are likely by the end of 2023 as economic recovery fathers strength and inflationary pressures intensify.
Bullard said he sees inflation running at 3% this year and 2.5% in 2022, which “would meet our new framework where we said we’re going to allow inflation to run above target for some time, and from there we could bring inflation down to 2% over the subsequent horizon”.
The 10-2 year yield spread fell to 117.4 bps on Monday, marking a drastic decline from the recent peak of 156.8 bps seen in the end of March.
Gold has been riding the tailwind of ultra-low interest rate environment and central banks’ quantitative easing since the Covid-19 pandemic, and thus it may be more vulnerable to a pullback when the reverse begins.
An even higher figure may spur a new round of selling in the yellow metal and strengthen the US Dollar, whereas the opposite may lead to the reverse.
Technically, gold prices breacheddecisively below the floor of an “Ascending Channel” and thus entered a sharp correction.
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