06.05.202211:38 Forex Analysis & Reviews: Fed's decision has no impact on gold

The Fed announced another interest rate hike this week. Many expected this decision to collapse the gold market, but prices are rising. The price of gold showed a positive trend yesterday, despite a stronger dollar and higher US government bond yields.The US currency and treasuries received support from the Fed's decision to raise interest rates by 50 bp in May. The last time the regulator raised rates by half a percentage point was more than 20 years ago.Despite the Fed's resolve, gold prices jumped 0.4%, or $6.90, to $1,875.70 on Thursday.

Meanwhile, silver futures climbed to $22.443. The price gap from the previous session was 0.2%.

The catalyst for precious metals was a speech by Fed chief Jerome Powell. He said that the regulator did not consider it appropriate to raise interest rates more sharply, by 75bp so far.Following Powell's statement yesterday, gold tested above $1,900 but faced rather strong resistance in the form of a rising dollar, was unable to consolidate at this level.Nevertheless, the precious metal market remains rather strong given the challenging market conditions: a new US central bank tightening cycle, rising treasuries and a continuing greenback rally.The main support for bullion now comes from increased volatility in the US stock markets. Like gold, stock indices initially reacted to the Fed chairman's statement with a rally.However, investor euphoria soon gave way to panic. Markets assessed the likely negative consequences of the Fed's aggressive policy for the US economy.Higher interest rates and a reduction in the Fed's balance sheet could lead to a slowdown in economic growth.Recession risk is an excellent driver for gold.At times when the economy is under threat, investors always seek to diversify their portfolios by investing in safe haven assets.Another important reason why gold prices are now not concerned about the hawkish stance of the Fed is that real interest rates will remain low until the end of 2022. At least at this stage, the markets do not see any serious preconditions for them to rise substantially.In addition, it is also worth considering fundamental factors that could also contribute to the precious metal's high investment attractiveness this year.The ongoing military conflict between Russia and Ukraine contributes to geopolitical tensions. Markets are also concerned about the tricky coronavirus situation in China. Lockdowns are putting not only the local but also the global economy at risk.Given a combination of macroeconomic and fundamental factors, analysts suggest that gold prices will remain stable during the year, despite the Fed continuing to fight inflation aggressively.Market strategist George Milling-Stanley predicts the asset will trade in the $1,800 to $2,000 range by the end of 2022.