The gold price has pushed higher this week and now trades at US$1,763 per ounce. That's around the same levels as it was in October 2021.
Pressure from an upswing in the US dollar and further interest rate hikes from central banks around the world have weighed the yellow metal down this year.
It fell from a peak of US$2,052/t oz in March and has been on a downward slope ever since, as illustrated below.
What's projected for the gold price?
Many analysts have had a hard time forecasting the trajectory of gold's price action this year. Traders have reversed trends with sharp recourse on several occasions over the past 12 months.
This week, US House of Representatives Speaker Nancy Pelosi embarked on a trip to Taiwan, the highest level US official to visit the island nation in 25 years.
As Reuters reported, this geopolitical event seemed to impact the price of gold.
"Gold prices advanced on Wednesday as the dollar fell and U.S.-China tensions rose," it reported.
However, according to Kinesis Money analyst Rupert Rowling, the turbulence may be short-lived, as US Treasury yields and interest rates still dominate the talk of the town.
"Market focus will return to interest rates and the negative long-term impact that is likely to have on gold," he said.
The impact of interest rates
On Tuesday, the Reserve Bank of Australia (RBA) met for its monthly policy meeting and lifted the cash rate by another 50 basis points to 1.85%.
The cash rate futures market is pricing a 65% probability of a rate increase to 2.35% in the RBA's next meeting on 3 September, 2022.
The prospect of entering a world of rising interest rates takes some of the shine away from the yellow metal, as the opportunity cost of holding gold while yields are high increases. As the axiom goes, gold pays no interest.
So it becomes a rates story and, with further interest rate hikes likely, this could weigh down the gold price, according to Refinitiv Eikon analysis:
Gold prices rebounded last week after labour market data showed that U.S. jobless claims hit [a] fresh 8 months high, however, anticipation of further rate hikes by the Federal Reserve limited gains.
Gold may hit US$1,650/oz if the Federal Reserve hikes the interest rate as expected.
With that, analysis suggests that investors should pay attention to interest rates, inflation data, and potential geopolitical risks in addition to watching the gold price in FY23.
