Inflation data from the US and the Federal Reserve’s policy announcements will help investors decide whether Gold will be able to extend its bullish rally into the end of the year, FXStreet’s Eren Sengezer reports.
“The US Bureau of Labor Statistics will release November inflation data on Tuesday. The annual Core CPI, which excludes volatile food and energy prices, is expected to edge higher to 6.4% from 6.3% in October. The market reaction to the inflation report is likely to be straightforward with a lower-than-expected Core CPI reading weighing on the US Dollar and providing a boost to XAU/USD and vice versa.”
“Considering that FOMC Chairman Jerome Powell acknowledged in his last public appearance that it would make sense to moderate the pace of interest rate hikes, a 50 bps increase should not come as a big surprise. In case the Fed opts for a 75 bps hike, which is an extremely low possibility at this point, XAU/USD is likely to come under heavy bearish pressure and fall sharply.”
“In September, the dot plot showed that officials’ median view of the Fed’s terminal (final) rate stood at 4.6%. The terminal is likely to be revised higher in December’s SEP. A reading closer to 5.5% than to 5.0% could be seen as reflecting a hawkish outlook by the majority of members, and trigger a rally in the US Treasury bond yields, as well as the USD. On the flip side, a terminal rate at or below 5.0% should allow markets to remain optimistic about a Fed policy pivot in the second half of 2023 and force the USD to continue to weaken against its rivals.”
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