Gold prices could get worse before getting better. That is the latest take from UBS Group, which highlighted short-term weakness in its note.
“Gold has faced renewed pressure as resilient labor market data and higher real yields prompted markets to shift expectations toward a possible rate hike this year,” the Swiss bank’s strategists Dominic Schnider, Giovanni Staunovo, and Wayne Gordon noted.
UBS describes the situation as a “double whammy.” A run of stronger-than-expected U.S. economic data, particularly resilient labor market figures, has altered expectations around monetary policy.
Warsh Takes the Helm
Investors are increasingly bracing for tighter conditions under Federal Reserve Chair Kevin Warsh, who holds his first meeting as Chairman this week. According to the FedWatch tool, the federal funds rate is almost guaranteed to remain between 350 and 375 bps. However, the odds of a 25 bps hike in July and September stand at 6.3% and 27.8%, respectively.
