US Federal Reserve Raises Rates, Following Suit, Australia's Reserve Bank, While China Continues to Stockpile it's Gold Reserves

Blog Categories , Insights

Welcome to Jaggards Wednesday Market Insight

8 March, 2023

As a 12pm, AEST.

Gold Spot Price $AU2,749.67

Silver Spot Price $AU30.50

Platinum Spot Price $AU1,421.18

Market news highlights

Gold (XAU/USD) plummeted more than 2%, currently settling around US$1812 per ounce, as Fed Chair Powell revealed a more aggressive stance during a Congressional hearing. Powell's statement hinted that the FOMC's terminal rate could be higher than initially expected, as a response to stubborn inflation. As a result, the price of gold suffered a bearish movement, while silver (XAG/USD) also saw a drop of more than 5%, currently hovering around US$20 an ounce, a level not seen since November 2022. The U.S. dollar's surge in the foreign exchange market further fuelled the downward trend for silver, though a weaker Australian dollar buffeted some of this drop.

Powell acknowledged that inflation has been slower to ease than anticipated, and the tight labour market has added more pressure to prices, making it harder for the Federal Reserve to tackle the issue. He also signalled that the Fed might need to speed up rate hikes but cautioned that the decision will depend on various factors that are yet to emerge.

Rate Hike Sparks Concerns for Homeowners

Following suit, The Reserve Bank of Australia (RBA), has made headlines by announcing an increase in the official cash rate target during its March meeting. This move, which saw the interest rate rise to 3.6 per cent, represents the highest rate the country has seen since May 2012.

The rate hike also marks the fastest tightening cycle by the RBA since the 1980s. Canstar, a financial comparison site, has calculated that this will lead to an additional $82 in monthly mortgage repayments for homeowners with a $500,000 mortgage.

With more pressure on households and mortgages, we’re yet to see any extreme pressure on the ASX200 currently sitting around $AU7271; comfortably above its 200MDA. If we see downward pressure on the Australian share market and as retail and wholesale investors start looking for safe haven positions, we could see Gold and Silver recover quite quickly.

Meanwhile, China's central bank has announced a fourth consecutive monthly increase in its gold reserves, acquiring an additional 25 tonnes in February. This move comes amidst growing concerns about the state of the global economy, as investors seek out more stable assets to safeguard their wealth.

While the focus remains on Chair Powell's congressional testimony, many experts predict that China's continued acquisition of gold will have a significant impact on the global market. As the world's largest consumer of gold, China's buying power has the potential to influence the price of the precious metal, as well as global economic trends more broadly.

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

30 days of Gold pricing (USD)