Fed Rate Hike Weighs on Gold, Oil Price Drop Supports Precious Metals
The price of gold and silver took a hit last week due to additional hawkish actions from the U.S. Federal Reserve, which increased the target range for the federal funds rate by 0.25 percentage points to 3.75% to 4.00%. This tightening of monetary policy is putting upward pressure on the value of the U.S. dollar, making it harder for precious metals priced in dollars to shine.
However, the decreased price of oil after reports that the United Arab Emirates and other Gulf States were restoring their exports could support the bullish outlook for precious metals by reducing the risk of additional inflation.
The ongoing Iran situation and high geopolitical tensions are still keeping gold as a safe-haven asset in investors' minds, despite lower expectations for gold demand with rising interest rates. Expectations for industrial demand for silver may be better due to rising electrification and solar energy, but tightening monetary policy and a possible recession could negatively impact investment and industrial demand.