Fed Rate Hike in September May Boost Gold Prices, Improve Liquidity Expectations

Zheshang Securities believes that the Federal Reserve's interest rate hike in September may have an unexpected effect on the market. Instead of exacerbating inflation, the hike could lead to a stabilization of long-term interest rates and improve liquidity expectations.

The firm also predicts that gold prices will benefit from this scenario, as investors become increasingly bullish about allocation opportunities.

According to Zhitong Finance APP, Zheshang Securities released a research report stating that the early rate hikes by the Federal Reserve are expected to curb the transmission of inflation from energy to downstream sectors, thus lowering market expectations for future inflation and allowing long-term interest-rate expectations to gradually stabilize.

The firm expects the threshold for further rate hikes going forward to rise significantly, leading to a marked improvement in long-term liquidity prospects, providing direct support to gold prices.