The XAU/USD gold price has been volatile in recent months, as investors have sought to protect their portfolios from the economic uncertainty caused by the coronavirus pandemic. However, the gold price has recently seen a contraction in volatility around the $1,920 mark, as the Federal Reserve’s policy decisions take center stage.
The Federal Reserve has been actively intervening in the US economy since the onset of the pandemic, with its policy decisions having a significant impact on the gold price. The most notable of these was the decision to cut interest rates to near-zero levels, which had a direct effect on the gold price. This is because lower interest rates make it less attractive for investors to hold cash, which leads to an increase in demand for gold as an alternative safe-haven asset.
The Fed’s decision to keep interest rates low has also had an indirect effect on the gold price, as it has led to a weakening of the US dollar. This has resulted in a decrease in the XAU/USD exchange rate, which has helped to reduce volatility around the $1,920 mark.
In addition to the Fed’s policy decisions, other factors have also contributed to the recent contraction in XAU/USD gold price volatility. These include an increase in demand for gold from central banks, as well as a decrease in investor risk appetite due to the ongoing uncertainty surrounding the pandemic.
Overall, the XAU/USD gold price has seen a contraction in volatility around the $1,920 mark in recent weeks, as the Federal Reserve’s policy decisions take center stage. This has been driven by both direct and indirect effects of the Fed’s actions, as well as other factors such as increased demand from central banks and a decrease in investor risk appetite. Going forward, it remains to be seen whether this trend will continue or if volatility will return to the gold price.
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