Despite opening at $1,900.35 per ounce on Wednesday with a daily downtrend, gold held firm with expectations the long-term value would rise.
Gold prices remained resilient and were expected to trade towards their prior high of $1,947 per ounce due to rising expectations the US Federal Reserve would reach its current target interest rate.
Recent developments regarding the BRICS – Brazil, Russia, India, China and South Africa – group of countries were also likely to put pressure on the dollar.
The current federal funds rate range is 5.25-5.50 per cent, and the US Fed remains committed to bringing high inflation – currently running at 3.67 per cent – down towards its two per cent target.
“Federal Reserve officials voted to hold interest rates steady at a 22-year high and revealed a divide over whether they should raise them once more this year, with most leaning toward another increase.
“Fed Chair Jerome Powell said that officials didn’t need to decide yet whether to lift rates again after a historically rapid series of increases over the past 18 months and as they await evidence that a recent inflation slowdown can be sustained,” reported The Wall
Another fundamental signalling a long-term uptrend for gold was an advancement regarding BRICS countries creating their own economic bloc, which could reduce reliance on the US dollar, leading to higher demand for gold as a safe haven asset.
Brazil’s President Lula da Silva has also previously called on the BRICS nations to introduce a new currency, which would make waves on de-dollarisation.
In August, Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE were invited to join the group, with membership expected on January 1, 2024.
The possible bloc expansion was seen as a threat to the US-dominated financial markets and dollar strength.
With the aforementioned fundamental indicators, it is likely gold will be utilised as a hedge against US dollar weakness.