(Kitco News) – The Prayed the market remains stuck in neutral territory as investors wait for the Federal Reserve to make its latest monetary policy decision this afternoon.
August gold futures last traded at $1,717 an ounce, virtually unchanged on the day. At the same time, September silver futures last traded at $18,745 an ounce, down more than 1% on the day.
The price action on both Prayed and silver has been relatively quiet this week as the market tries to determine how aggressive the US central bank will be after the summer. After a bit of back and forth, a 75 basis point hike is almost guaranteed. According to CME’s FedWatch tool, markets see a 26% chance of a 100 basis point move.
However, many economists and market analysts have said that markets are now looking beyond the July meeting and are eager for any further guidance on interest rates, especially as recession fears continue to grow.
Craig Erlam, senior European market analyst at OANDA, said in a note to clients on Wednesday that markets are already pricing in a sharp change in interest rates in 2023.
“The Fed must walk a fine line as any validation of that will undermine its efforts to tighten and control inflation. The focus will be on its guidance over the coming months and how aggressive it will continue to be,” he said in the report. Note.
“It’s hard to say with confidence at this point in time which message investors would prefer, as lower yields have tended to improve sentiment in equity markets, but fewer rate hikes could raise inflation risks or signal a weaker economy. Neither is ideal for equity markets,” he added. . “The safe play may be 75 basis points now and the option to repeat it in September, while also highlighting the data dependency of any decision.”
Han Tan, chief market analyst at Exinity, said that Prayed prices could struggle as the market continues to price in another 1% increase in interest rates through the end of the year.
“If Chairman Powell signals today that policymakers are sticking with their ‘floor to bottom’ approach to quelling multi-decade high inflation, preparing even more huge hikes along the way, that could send the US dollar into another rampage.” via FX while pushing spot gold into sub-$1700 dominance. That could also result in further carnage for risk assets,” he said.
The biggest driver for gold today remains the US dollar, which is also consolidating ahead of the Fed’s monetary policy decision. However, some currency analysts expect the Fed’s hawkish stance on interest rates to support the dollar as it trades lower from last week’s 20-year highs.
“We are not yet ready to change our strong bet on the dollar, especially if the Fed sends a dovish message as we expect,” currency analysts at Brown Brothers Harriman said. “When all is said and done, we believe the US economy remains the most resilient. However, we expect a period of consolidation for the dollar until the US economic outlook becomes clearer.”
Although gold prices maintain support above $1,700 an ounce, market analysts at City Index said that $1,680 is another important support level to watch.
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