What next for gold with Fed raising interest rates?

The US inflation report for the month of November was released on Tuesday, with it currently at 7.1 per cent, down sharply from 7.7 per cent in October, while the peak inflation rate was 9.1 per cent in June.

“In November, the Core Consumer Price Index (CPI), which excludes volatile energy and food prices, rose six per cent from a year ago, slowing from a 6.3 per cent increase in October. September’s 6.6 per cent increase​​ was the biggest jump since August 1982.

“Last month, consumer prices​ rose at the slowest pace since December 2021, closing out a year when inflation peaked at its highest level in four decades and challenged the Federal Reserve’s ability to maintain economic growth,” the Wall Street Journal reported.

PP Link Securities business manager Nhim Kosol said that while prices are still rising as the US economy continues to suffer inflationary pressures, they are not going up as fast as they were in June.

“The CPI figures are understated US government figures, but nevertheless these manipulated government figures in November are still smaller than those in June.

“The economy is still adding jobs but at a slower rate, and we’re seeing layoffs accelerate.

“For the year, the stock market is down and consumer spending is slowing, while rate of inflation is slowing but at the expense of a degrading economy. The bottom line is, the inflation rate is 7.1 per cent, which is an unacceptable level.

“Therefore, the Fed still has a lot of work to do, and the figures leave the Fed on track to lift interest rates by 0.5 a percentage point on Wednesday, following larger increases of 0.75 at their past four meetings,” Kosol said.

The technical analysis indicates​ that since early November the price of gold has found support at $1,617.35 per ounce, as in September and October, with it rallying to a December high of $1,824.25.

Gold will be less attractive with the US interest rate still able to rise and run above five per cent in mid-2023.

With such analysis bases, gold investors may trade in a range of $1,750 to $1,835 per ounce.