Gold is recovering on the back of a weaker US dollar and has climbed to around $1,820. The US Federal Reserve will be concluding its two-day meeting this evening and announcing whether and to what extent it will be raising interest rates. A 50 basis points (bps) rate hike could see the yellow metal gaining some ground, economists at Commerzbank report.
“The Wall Street Journal had raised the prospect the day before yesterday of a rate increase of 75 bps, prompting market expectations to be revised considerably upwards and bond yields to rise massively. There has even been speculation on the market recently about a possible rate hike of 100 bps, though this is unrealistic.”
“If the Fed were to raise interest rates by ‘only’ 50 bps today, this could be viewed as disappointing. In this case, some of the movements seen over the last few days could be reversed, i.e. yields could fall, the US dollar could weaken and gold could gain.”
“It will be interesting to hear how Powell assesses the outlook for interest rates. If he sounds very hawkish and raises the prospect of bigger rate increases – contrary to his previous remarks – we believe that the gains that gold might potentially make would be limited, or that the gold price could continue its downswing.”
See – Fed Preview: Forecasts from 12 major banks, increasing bets of a 75 bps rate hike
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