• Gold prices drop to lowest in 3 weeks ahead of US inflation report
  • Rising energy prices may lead to another interest rate adjustment by Federal Reserve
  • BRICS community's push for diversification could impact long-term gold prices

Harare- Gold prices have declined to below $1,910 per ounce today, reaching their lowest point in approximately three weeks. This drop comes as investors exercise caution while awaiting a crucial US inflation report that could potentially impact the Federal Reserve's future policy decisions.

The United States is set to release consumer inflation data today and producer inflation figures on tomorrow. The inflation numbers could potentially exceed expectations due to rising energy prices. This could increase the likelihood of the Federal Reserve implementing another 25-basis-point interest rate adjustment in November.

However, in anticipation of their policy-setting meeting this month, Federal Reserve policymakers have expressed a clear stance: they are not eager to raise interest rates, but they are also hesitant to declare complete success.

According to market expectations, it is likely that the US central bank will keep interest rates at their current level in the upcoming meeting in order to stimulate spending and production. However, there is a growing inclination towards the possibility of a rate hike in November.

The European Central Bank anticipates that inflation in the Eurozone will continue to stay above 3% in the upcoming year. This expectation strengthens the argument for another rate increase on Thursday.

Due to the resurgence of the BRICS community and their efforts to replace the US dollar as a reserve currency with their own currencies and gold, it is highly likely that gold prices will experience a significant increase in the mid to long term. The growing interest in diversifying away from the US dollar and the potential shift towards gold as a store of value could lead to a surge in demand and subsequently drive up gold prices.

However, it is important to note that the United States still holds approximately 60% of international reserves, as indicated by the Q1 statistics from the International Monetary Fund (IMF). This signifies that the US dollar continues to play a dominant role as a reserve currency in the global economy. While the BRICS community's efforts to replace the US dollar with their own currencies and gold may impact the long-term dynamics, the current statistics highlight the significant position and influence of the US dollar in the international reserve landscape.

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