Interest rate expectations depress demand: Gold price hits lowest level since March

Interest rate expectations depress demand
Gold price hits lowest level since March

In May, the gold price just missed a record high. It is now at its lowest level in almost half a year. Experts explain this with possibly rising US interest rates. But banks are also reluctant to buy.

The price of gold has continued the slide of the past few trading days. It fell to its lowest level in almost half a year. In London, the listing for a troy ounce (31.1 grams) slipped to 1889.70 US dollars. The precious metal was last traded so cheaply in March. Around noon, the gold price was again at 1895 dollars. Market observers explain the latest price pressure with speculation that interest rates will continue to rise in the USA.

Gold in USD
Gold in USD 1,886.00

The minutes of the US Federal Reserve’s latest meeting, released on Wednesday evening, showed that the US central bankers are keeping the door open for further interest rate hikes in the fight against inflation. Rising interest rates on the capital markets make gold less attractive.

In addition, the rise in the value of the dollar as a result of speculation on interest rates put selling pressure on the shares. Since gold is traded in dollars on the world market, a strong US currency makes the precious metal more expensive and slows demand.

Declining gold purchases by central banks

Dekabank experts also referred to the declining gold purchases by central banks. According to data from the World Gold Council interest group, central bank purchases fell by around 35 percent in the months from April to June compared to the previous quarter.

“While their share of total demand was still around a third in the third quarter of 2022, it was recently just over ten percent,” said an analysis by Dekabank.

At the beginning of May, the price of gold rose to $2,062, just missing a record high. Analysts at Dekabank are assuming that the price of gold will settle in the region of $1,900 per troy ounce by the end of the year.

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