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Gold Investors Await Fed Policy Announcements

Gold Investors And Fed Policy: The US economic calendar will feature Retail Sales data for August on Tuesday. Investors expect a monthly increase of 0.2% following the 1% growth recorded in July. A negative print could make it difficult for the USD to find demand and help Yellow Metal edge higher. Nevertheless, the market reaction is likely to remain short-lived, with investors refraining from taking large positions ahead of the Fed’s monetary policy announcements on Wednesday.

The market positioning suggests that Gold faces a two-way risk heading into the Fed event. A 25 bps rate cut could boost the USD with the immediate reaction and cause Yellow Metal to stage a correction. On the other hand, there is room for further USD weakness in case the Fed opts for a 50 bps rate reduction.

Rate Decision

In addition to the rate decision, market participants will also scrutinize the revised SEP, also known as the dot plot. The CME FedWatch Tool shows that there is a stronger-than-90% chance that the Fed will lower the policy rate by a total of 100 basis points this year, including the rate cut in September. This positioning suggests that markets are forecasting at least one 50 bps and two 25 bps rate cuts in the last three policy meetings of the year.

In case the dot plot shows that policymakers expect the policy rate to be at 4.25%-4.5%, 100 bps below the current rate, at the end of the year, Yellow Metal would gather bullish momentum even if the Fed announces a 25 bps cut. On the other hand, a 25 bps rate cut, accompanied by a dot plot pointing to a total of 75 bps reduction in rates by the end of the year, could help US T-bond yields rebound and hurt Gold.

Fed outcome

Investors will also pay close attention to growth projections. A significant downward revision to growth forecasts could revive fears over a recession next year and trigger a selloff in the US stock markets. In this scenario, the USD could hold its ground and limit its losses even if the Fed outcome is considered to be dovish.

In summary, the Fed’s rate decision, the revised dot plot, and Fed Chairman Jerome Powell’s comments during the post-meeting press conference will surely ramp up market volatility. There will be too many moving parts, and it might be too risky to take a position, at least until the dust settles by the European morning the next day. 

Gold Technical Outlook And Forecast

The Relative Strength Index (RSI) indicator on the daily chart stays below 70, suggesting that Gold has more room on the upside before turning technically overbought. The next resistance could be seen at $2,600 (round level) before $2,660 (upper limit of the ascending regression channel coming from mid-February). 

On the downside, $2,530 (static level, former resistance) aligns as first support before $2,500 (static level, round level) and $2,460 (50-day Simple Moving Average).

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2 thoughts on “Gold Investors Await Fed Policy Announcements”

  1. गोल्डमैन सैक्स का कहना है कि केंद्रीय बैंक की मांग और फेडरल रिजर्व द्वारा ब्याज दरों में कटौती से सोने को बढ़ावा मिलेगा, उन्होंने दोहराया कि 2025 की शुरुआत तक कीमतें 2,700 डॉलर प्रति ट्रॉय औंस पर होंगी। अमेरिकी बैंक के अनुसार, 2022 के मध्य से केंद्रीय बैंक की बढ़ती खरीद और दरों में कटौती से पश्चिमी पूंजी को सोने के एक्सचेंज-ट्रेडेड फंड में वापस लाने से कीमती धातु को समर्थन मिलेगा। सोने का वायदा वर्तमान में 0.1% कम होकर 2,605.50 डॉलर प्रति ट्रॉय औंस पर कारोबार कर रहा है, क्योंकि व्यापारी बुधवार को अमेरिकी केंद्रीय बैंक की पहली दर कटौती के आकार को देखने का इंतजार कर रहे हैं। सीएमई फेडवॉच टूल दिखाता है कि बाजार वर्तमान में 25-आधार-बिंदु कटौती की 33% संभावना और 50-आधार-बिंदु कटौती की 67% संभावना पर मूल्य निर्धारण कर रहे हैं।

  2. Gold is set to be boosted by central-bank demand and imminent interest-rate cuts by the Federal Reserve, Goldman Sachs says, reiterating it sees prices at $2,700 a troy ounce by early 2025. According to the U.S. bank, the precious metal will be supported by rising central-bank purchases since mid-2022 and rate cuts bringing Western capital back into gold exchange-traded funds. Gold futures currently trade 0.1% lower at $2,605.50 a troy ounce, as traders await to see the size of the U.S. central bank’s first rate cut on Wednesday. Markets are currently pricing in a 33% chance of a 25-basis-point cut and a 67% chance of a 50-basis-point cut, the CME FedWatch tool shows.

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