Expecting the protocol of the Fed's recent meeting, the US dollar dropped to the lowest level of this year against a basket of major currencies. As a result, gold prices soared to the highest levels last seen four months ago, reaching $1,883 per troy ounce. What is more, the safe-haven asset continues rising.
The US Fed promised that it would keep the key interest rate at the low level for some time. Representatives of the regulator also said that they expect a short-lived increase in the US inflation. At the same time, there are rumors that the key interest rate could be raised earlier than expected.
More and more investors are coming to such a conclusion after the latest publication of the US consumer price data. That is why investors are focused on the Fed's meeting minutes. The document may clear up the situation concerning the inflationary pressure. Although the Fed will hardly announce a rise in the interest rates, any controversial comments may excite speculation.
Most market players consider gold as a price pressure hedging tool. Once there are higher risks of a further rise in prices, investors will begin opening more and more positions on gold. In other words, the growing inflation contributes to a jump in gold prices. However, it is still difficult to predict how high inflation may climb and what consequences it may have. Moreover, there is no information on the date when the Fed is planning to raise the interest rates.
At the same time, the US dollar is losing its attractiveness amid the inflationary risks. If the regulator announces higher interest rates, the greenback will immediately gain in value, thus, pushing down the precious metal. Thus, market participants should decide whether they believe the US Fed or not. Other central banks are also creating uncertainty. According to the charts, investors expect a rise in inflation rather than an increase in the benchmark rate.
Against this background, gold broke the 200-period DMF for the first time since January. This is the first break since the price reached the record high in 2020. It seems that gold may hit the level of $1,900.