Gold continues to trade either side of $1,650 an ounce as the markets await the Federal Reserve’s latest interest rate decision later today. The overwhelming expectation is that the US central bank will implement its fourth consecutive hike of 75 basis points, something that has long since been priced into markets.
Yet while today’s announcement is unlikely to materially move gold, assuming the Fed does increase its rate in line with expectations, the press conference by Fed Chair Jerome Powell that follows the decision is much likelier to have an impact. Investors will be closely scrutinizing his every word to determine how much longer and how much harder the Fed is likely to keep hiking rates for.
If Powell outlines a more dovish trajectory going forward, that will give gold some relief after months of downward pressure from the series of large rate hikes implemented by the Fed. Bank analysts are split on whether December will be another 75 basis point move or a 50 basis point one, but the expectation remains that further hikes are likely next month. Therefore, even if Powell’s comments point to a softening come 2023, the near-term outlook for gold remains clouded by today’s expected hike with another one next month.
As such, while any hint of a less steep interest rate curve next year will be supportive for gold, it is hard to see gold making significant gains while interest rate hikes continue to be implemented. Gold looks to have found its comfortable trading range either side of $1,650 an ounce so it would take something out of the ordinary from the Fed or Powell to shake it out of its range.
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