Gold Investors Await Fed Policy Announcements

Gold Investors And Fed Policy: The US economic calendar will feature Retail Sales data for August on Tuesday. Investors expect a monthly increase of 0.2% following the 1% growth recorded in July. A negative print could make it difficult for the USD to find demand and help Yellow Metal edge higher. Nevertheless, the market reaction is likely to remain short-lived, with investors refraining from taking large positions ahead of the Fed’s monetary policy announcements on Wednesday.

• तूफान फ्रांसिन के बाद आपूर्ति संबंधी चिंताओं के कारण कच्चे तेल की कीमतों में उछाल
• Reliance Infra share: Anil Ambani-owned stock jumps 6% on fundraise buzz
• Rupee to receive boost as chances of significant Fed rate cut rise
• Bajaj Housing Makes Stellar Debut
• Gold Jumps to record high on Fed rate cut outlook
• The near-term technical picture highlights the dominance of buyers.

The market positioning suggests that Gold faces a two-way risk heading into the Fed event. A 25 bps rate cut could boost the USD with the immediate reaction and cause Yellow Metal to stage a correction. On the other hand, there is room for further USD weakness in case the Fed opts for a 50 bps rate reduction.

Rate Decision

In addition to the rate decision, market participants will also scrutinize the revised SEP, also known as the dot plot. The CME FedWatch Tool shows that there is a stronger-than-90% chance that the Fed will lower the policy rate by a total of 100 basis points this year, including the rate cut in September. This positioning suggests that markets are forecasting at least one 50 bps and two 25 bps rate cuts in the last three policy meetings of the year.

In case the dot plot shows that policymakers expect the policy rate to be at 4.25%-4.5%, 100 bps below the current rate, at the end of the year, Yellow Metal would gather bullish momentum even if the Fed announces a 25 bps cut. On the other hand, a 25 bps rate cut, accompanied by a dot plot pointing to a total of 75 bps reduction in rates by the end of the year, could help US T-bond yields rebound and hurt Gold.

Fed outcome

Investors will also pay close attention to growth projections. A significant downward revision to growth forecasts could revive fears over a recession next year and trigger a selloff in the US stock markets. In this scenario, the USD could hold its ground and limit its losses even if the Fed outcome is considered to be dovish.

In summary, the Fed’s rate decision, the revised dot plot, and Fed Chairman Jerome Powell’s comments during the post-meeting press conference will surely ramp up market volatility. There will be too many moving parts, and it might be too risky to take a position, at least until the dust settles by the European morning the next day. 

Rupee to receive boost as chances of significant Fed rate cut rise https://t.co/5EMakXDsiv

— Gold Silver Reports (@goldsilverrepor) September 17, 2024

Gold Technical Outlook And Forecast

The Relative Strength Index (RSI) indicator on the daily chart stays below 70, suggesting that Gold has more room on the upside before turning technically overbought. The next resistance could be seen at $2,600 (round level) before $2,660 (upper limit of the ascending regression channel coming from mid-February). 

On the downside, $2,530 (static level, former resistance) aligns as first support before $2,500 (static level, round level) and $2,460 (50-day Simple Moving Average).