XAU/USD tends to gain once rate hike cycles begin – Commerzbank

Gold price has risen to the $1,940 area despite the US Federal Reserve rate hike. Six more hikes are expected this year. The course is thus set for the coming months, so why is XAU/USD climbing today nonetheless? A glance at previous rate hike cycles shows that gold tended to gain once the cycle began, economists at Commerzbank report.

War in Ukraine points to increased demand for gold

“Fed increased the key rate by 25 basis points. Fed Chair Powell also raised the prospect of further rate hikes. The projections of Fed members point to seven rate hikes by year’s end, including yesterday’s.”

“A glance at previous rate hike cycles shows that gold tended to gain once the cycle began. The same appears to be happening this time too, though comparisons with past rate hike cycles are difficult in view of the war in Ukraine. After all, this is an additional factor that points to increased demand for gold. ”