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Gold will struggle as Fed's push to normalize monetary policy supports the US dollar - HSBC

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(Kitco News) - Gold prices remain stuck in neutral below $1,800 an ounce. Commodity analysts at HSBC are warning investors that gold gains could be limited in the near term as the Federal Reserve's plan to normalize its monetary policies drives bond yields and the U.S. dollar higher.

The analysts at HSBC said that gold prices could struggle as central banks are on the cusp of shifting their monetary policies. Expectations are growing for the Federal Reserve to reduce its monthly bond purchases before the end of the year.

"Global monetary and fiscal policies are no longer outright supportive of gold in the U.S. or globally. With the era of ultra-loose monetary policies coming to an end and fiscal stimulus being pulled back, gold investment is down," the analysts at HSBC said in a report Tuesday.

"We still believe the USD is gradually transitioning to a stronger path due to the slowdown in global growth and the Fed's path towards normalization. A gradually stronger USD could be mildly negative for gold," the analysts added.

The comments come as gold prices are stuck below $1,800 an ounce. December gold futures, while holding gains, are off their session highs, last trading at $1,771.60 an ounce, up 0.31% on the day.

HSBC noted that rising consumer prices would not have much impact on gold if the inflation pressures end up driving bond yields higher. 10-year bond yields are currently near a 4-month high at 1.62%.

Not only are bond yields rising, but there are growing expectations that the Federal Reserve could start to tighten interest rates before the second half of 2022. The CME FedWatch Tool shows that markets see a more than 47% chance of an interest rate hike by June of next year.

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