Gold Prices Surge Ahead of Anticipated FOMC Rate Decision
Gold prices have experienced a rally in the past 24 hours in anticipation of the Federal Reserve's FOMC rate decision on Wednesday. Chairman Jerome Powell and the committee are widely expected to raise benchmark lending rates to a range of 5.25% - 5.50%, continuing the monetary tightening cycle after a previous pause. The US economy has shown resilience during this period of rate hikes.
The Citi Economic Surprise Index for the United States, currently at 70.30, indicates that economic data has been generally outperforming expectations. While headline inflation has eased without significant impact on unemployment, core CPI readings (excluding food and energy prices) remain sticky. This suggests the Fed may continue tightening if needed, as the fight against inflation is not considered over.
Expectations of a pivot away from tightening, which arose after the collapse of Silicon Valley Bank in March, are likely to be tempered, given the economy's relatively stable performance. While there is a weak consensus for a further rate hike to 5.50% - 5.75% by year-end, financial markets have mostly priced out the possibility of rate cuts this year.
As the Fed appears reluctant to hint at easing and is focused on maintaining tight policy, Treasury yields are expected to remain strong. This could be challenging for gold, which does not offer yield. XAU/USD is currently at a similar level to July 2020, raising questions about its role as an inflation hedge.
XAUUSD
SELL 1969- 1971 🕯🕯
✅ TP1: 1964
✅ TP2: 1959
✅ TP3: 1954
❌ SL: 1975
Gold prices have experienced a rally in the past 24 hours in anticipation of the Federal Reserve's FOMC rate decision on Wednesday. Chairman Jerome Powell and the committee are widely expected to raise benchmark lending rates to a range of 5.25% - 5.50%, continuing the monetary tightening cycle after a previous pause. The US economy has shown resilience during this period of rate hikes.
The Citi Economic Surprise Index for the United States, currently at 70.30, indicates that economic data has been generally outperforming expectations. While headline inflation has eased without significant impact on unemployment, core CPI readings (excluding food and energy prices) remain sticky. This suggests the Fed may continue tightening if needed, as the fight against inflation is not considered over.
Expectations of a pivot away from tightening, which arose after the collapse of Silicon Valley Bank in March, are likely to be tempered, given the economy's relatively stable performance. While there is a weak consensus for a further rate hike to 5.50% - 5.75% by year-end, financial markets have mostly priced out the possibility of rate cuts this year.
As the Fed appears reluctant to hint at easing and is focused on maintaining tight policy, Treasury yields are expected to remain strong. This could be challenging for gold, which does not offer yield. XAU/USD is currently at a similar level to July 2020, raising questions about its role as an inflation hedge.
XAUUSD
SELL 1969- 1971 🕯🕯 ✅ TP1: 1964
✅ TP2: 1959
✅ TP3: 1954
❌ SL: 1975
