There is a slight selling pressure in gold as markets react to hawkish comments by Fed Chairman Jerome Powell.
The Fed chief announced on Monday a potential 50 basis point rate hike in May, thereby pushing 10-year yields to nearly 2.40%, almost the highest level in three years. Surprisingly, gold prices remained stuck above critical support levels and the psychologically important level of $1900 despite the strengthening of both dollar and bond yields
Daniel Briesemann, commodity analyst at Commerzbank, said there is now a chance that aggressive moves by the Fed could push the US economy into a recession, which would be good for gold.
Ole Hansen of Saxo Bank said the same thing, noting that the risks of a recession are growing. He also said investors must pay close attention to oil prices.
Going forward, analysts from Heraeus Precious said gold could be volatile as the Federal Reserve enters a tightening cycle, but investors should keep an eye on the bigger picture.
Invesco chief strategist Christina Hooper also believe that risks are rising anyway, even if the US central bank plans a soft landing. Assuming that the Fed is just toughening up its speeches, but in reality things will look dovish, Hooper said it makes sense for investors to hold gold and commodities as important tools for diversification.