Gold & Crypto Rally Hits Roadblock as Fed Rate Hike Expectations Rise

The recent rally in gold and crypto markets has hit a roadblock as market participants are pricing in a high chance of a US Federal Reserve rate hike later this year.

Gold prices have surged 7.6% in the last month, while silver has increased by 6%. Bitcoin, on the other hand, has rallied 26% to reclaim the $80,000 mark. The CME FedWatch tool indicates that there is a 58% chance of a rate hike, up from 45% a month ago.

Historically, alternative assets like gold and crypto have been vulnerable to hawkish Fed stances, which can push yields and the dollar index higher, increasing the opportunity cost of holding non-yielding assets. However, analysts point out that the current environment is different due to rising demand for other stores of value and a potential risk of dollar debasement.

Manav Modi, commodities analyst at Motilal Oswal Financial Services, notes that underlying demand remains supportive but a hawkish Fed could be an important resistance factor. Siddarth Bhamre, head of institutional research at Asit C Mehta Investment, believes that geopolitical uncertainty continues to support gold and that buyers will not be scarce in the current uncertain environment.