Gold’s Price Stands Defenseless Against Fed Policy


Recently, gold rebounded to the joy of dealers. However, it has failed to extend its highs from this past week and seems to be stagnant. Furthermore, the Fed decision might enhance the stalling in its rebound as the Central bank appears prepared to implement a restrictive policy. Therefore, gold’s price may keep consolidating ahead of the Federal Open Market Committee (FOMC).

The Central bank is expected to deliver a 75bp rate hike, and the increase from the yearly low may be a one-time thing as the SMA continues to reflect a negative slope. This might cause gold to face blows for the rest of the year since the FOMC plans to set the Fed Funds rate above neutral.

 Also, the market wonders whether Chairman Jerome Powell and his team will intensify their efforts to restrain the US Consumer Price Index (CPI) rise as the central bank plans to enhance a soft landing for the economy.

As a result, gold may trade at low prices if the FOMC implements the restrictive policy. At the same time, a shift in Fed’s forward guidance may promote a relevant recovery in the price of gold.

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