RBA's 9th Consecutive Rate Hike Leaves Metal Prices in Limbo Amid Persistent Inflation

Blog Categories , Insights

Welcome to Jaggards Wednesday Market Insight

8 Feb, 2023
As at 10am, AEST

Gold Spot Price $AU2,691.44
Silver Spot Price $AU31.92
Platinum Spot Price $AU1,407.94

Market Sentiment

Google
Gold Price as a search trend is now picking up noticeably towards the end of January and early February.

Twitter sentiment
#Goldprice was tweeted 1780 times - a significant drop in sentiment from the previous week’s tweets (28,270) following the US FED news last week.

Market news highlights

30-day moving charts for gold and silver also showed a clear ‘crest’ in pricing, followed by a current consolidation period.

Countries worldwide are now recovering and preparing for yet another rate rise within their own banking systems.

The Reserve Bank of Australia's decision to increase the cash rate target by 25 basis points to 3.35% has caused some stir in the markets. The RBA’s Governor, Dr. Philip Lowe, argued that a higher cash rate was necessary to keep inflation from reaching unsustainable levels. He also stated that the decision was aimed at achieving balanced economic growth, while at the same time safeguarding employment.

However, not everyone is convinced that the rate increase was a good move. Many experts have expressed their doubts, arguing that the rate rise could add to the already high levels of consumer debt in Australia. They have also pointed out that higher rates could put further strain on small businesses and put a damper on the housing market.

At the same time, some economists and analysts are of the opinion that the RBA's decision was the right move. They argue that the rate increase is necessary to ensure the health of the economy in the long term. They believe that the boost in rates can act as a buffer against global economic headwinds, while also helping to maintain economic stability.

The RBA's decision to raise the cash rate could be beneficial for the AUD/USD exchange rate in the short term. The markets may reveal, however, that the RBA's rate hike had positive effects on the AUD/USD exchange rate in the long run. The AUD/USD initially firmed after the RBA's rate hike but has since eased, sitting at US0.6964 at the time of writing. The RBA is still expecting to continue increasing the rate in the future, potentially stabilising the AUD/USD exchange rate over time. Only time will tell whether this prediction is accurate.

Source: TradingView

The question is whether gold is taking a pause before the next rate hike. Inflation is still above healthy levels, so it is likely that most commodities have the potential to increase in value in the near future. Time will tell whether this trend will continue or not.

*Not financial advice, please do your own research prior to any investment decisions you make.

Charts
Charts are shown in USD and show 30 days of activity.

Gold prices have eased to around $US1869, following the US Fed News last week to increase the base interest rate by 25 basis points.

We’ve also included a yearly chart for Gold (and silver) this week, to show a better macro position for both precious metals.