Fed raised interest rates, what will gold price be?

The US Federal Reserve (Fed) on May 4 announced to raise interest rates by 0.5% to cope with the worst inflation in 40 years. This is the first time the Fed has raised interest rates at this level. The reference interest rate in the US is in the range of 0.75% – 1%.

The decision was unanimously approved by all 12 members of the Federal Open Market Committee (under the Fed). In March, the agency raised interest rates for the first time since the end of 2018, with 0.25%. The decision immediately affected the gold market – the price of gold rose sharply.

At 10 am this morning, the world gold price is trading at the threshold of 1,900 USD/ounce, an increase of nearly 20 USD/ounce compared to the early hours of this morning. Gold price has regained the threshold of 1,900 USD/ounce after falling to the bottom of 2 months.

Domestic gold price also increased by nearly half a million dong following the increase of the world gold price. Specifically, the domestic gold price increased sharply from 300,000-420,000 VND per tael.

Also at the same time, Hanoi DOJI Company listed SJC gold with the buying price of 69.70 million dong/tael and selling at 70.35 million dong/tael, up to 350,000 dong/tael.

Meanwhile, Saigon Jewelry Company and Phu Quy Company increased by 300,000 VND/tael, with the listed price of SJC gold at 69.70-70.40 million VND/tael and 69.65-70, respectively. 35 million VND/tael.

Assessment of the impact of the Fed’s interest rate hike on gold prices, experts economy Dinh Trong Thinh said that, in principle, the Fed raising interest rates will make the USD appreciate and gold decrease. However, with the current situation, high inflation, unsatisfactory growth, and stagnant production not only in the US but also in many developed countries around the world, the gold price will still increase in the coming time.

According to Mr. Thinh, the fact that the Fed and central banks of many countries raised interest rates was to avoid inflation, but the inflation rate is still very high along with the slow growth rate of the world. Therefore, between now and the end of the year, the price of gold will still increase.

“Investors need to be careful to invest in gold at this time because the gap between world and domestic gold is still very far, very risky.“, Mr. Thinh said.

Economist Nguyen Tri Hieu said that the Fed’s increase in interest rates was to control inflation when inflation in the US reached the highest level in the past 40 years. An increase in the prime interest rate will cause the value of the USD and bond yields to increase. According to the laws of finance, the price of gold will fall.

“But this time, gold and USD will increase in the same direction. USD increases due to economic crisis and in crisis gold will increase because gold acts as a safe haven for finance, especially in the current unstable geopolitical context.“, said Mr. Hieu.

Economist Le Dang Doanh stated that the current situation is difficult to predict the fluctuation of gold price. The Fed raises the basic interest rate, which will strengthen the price of the USD, and if the USD increases, it will restrain the price of gold. However, the war between Russia and Ukraine is still unknown, so it is difficult to predict the movement of precious metal prices.

Gold is always seen as a potential asset around the end of 2022, especially when commodities have shocking prices because of supply shortages. Therefore, it is not excluded that gold will continue to increase.