Rosalind Evans
The price of gold experienced a significant upswing in response to the latest meeting of the US Federal Reserve, but did it reach a new record high?
Although the gold price briefly dipped below $1,980 per ounce earlier in the week, it swiftly rebounded.
Mid-week, the value of the precious metal began climbing again, driven by news emerging from the Federal Reserve’s meeting held from May 2 to May 3. It was widely anticipated that the central bank would raise interest rates by 25 basis points, and it indeed followed through, bringing the target federal funds rate to a range of 5 to 5.25 percent.
Typically, gold performs better when interest rates are low rather than high. However, market experts have also taken note of the Federal Reserve’s post-meeting press release, which contains language similar to what was used when rate hikes ceased in 2006. Consequently, expectations of a mid-June pause in rate hikes are now running high.
Against this backdrop, gold experienced a surge on Wednesday, leading to reports that it had achieved a new all-time high. Although John Reade from the World Gold Council acknowledged a fresh high in COMEX futures through a tweet, the spot price fell just short.
Other factors are influencing the gold market besides the Federal Reserve. One major factor is the ongoing banking crisis, with First Republic Bank being the latest casualty, seized by regulators on May 1. JPMorgan Chase has acquired most of its assets and deposits, which has raised concerns about banks deemed “too big to fail.”
Gold serves a crucial role as a haven, and many experts believe it has the potential to climb even higher in 2023. Don Durrett from GoldStockData.com recently shared his perspective in an interview with the Investing News Network:
“In the short term, I think gold will dip to somewhere between $1,800 and $1,850, marking the final selling stage. Once that concludes, as long as gold remains above $1,800, we should reach $2,300 by the end of this year. I anticipate a rapid upward surge if gold maintains a price above $1,800 until the end of June. Silver will likely follow suit.” – Don Durrett, GoldStockData.com
When writing this on Friday afternoon (May 5), gold traded at around $2,015.
Mexico’s Implementation of a New Mining Law Raises Concerns
During an emergency session last weekend, the Mexican government passed a new mining law that reduces the maximum concession duration from 50 to 30 years. Additionally, the law requires the return of a portion of profits to local communities.
Commodities play a crucial role in Mexico’s economy, as it ranks as the top producer of silver globally and is a significant producer of gold and copper. However, since assuming office in 2018, the current president has adopted a strict stance on mining. No new concessions have been granted during his tenure, a decision criticized for negatively impacting the sector. Furthermore, Mexico has nationalized its lithium industry.
Numerous Canadian mining companies operate in Mexico, and the country’s trade minister expressed concerns about the new law before it was approved. Conversely, Mexico has called out foreign miners for practices that harm the environment and fail to support nearby communities affected by mining operations.
As the gold price continues its upward trajectory in response to the US Federal Reserve’s interest rate hike and market expectations, investors and experts remain optimistic about its future performance. While short-term fluctuations may occur, gold’s role as a haven and the prevailing economic conditions suggest a potential for further growth in 2023. Additionally, Mexico’s new mining law adds a layer of complexity to the global mining industry, raising concerns and highlighting the delicate balance between economic development, environmental sustainability, and community well-being.
