XAU/USD: Gold Whipsaws as ‘Higher-For-Longer’ Starts to Settle in Traders’ Minds

Interest rates aren’t going any lower, that’s for sure. What that means for gold is what traders try to figure out.

• Gold prices XAUUSD edged higher early Friday, whipsawing from a day earlier when traders reacted to the Federal Reserve’s update on interest rates. The yellow metal this morning climbed to $1,925, up from $1,919 per troy ounce, aiming to snap a three-day losing streak.
• Over the past two days, gold has been struggling to make sense of the US central bank’s message. Fed chief Jay Powell skipped a hike on Wednesday but sent shockwaves saying interest rates will stay higher for longer. In other words, markets will not see a rate cut any time soon.
• What do higher borrowing costs mean for gold? Gold is a non-yielding asset, it doesn’t get you any interest no matter how long you hold it. Higher rates generally mean holding cash is a better investment as far as yields are a factor since cash gives you a percentage return. Hence, higher rates may increase the opportunity cost of holding gold.