MCX Gold Price Forecast: Investors Await the Decision of The US Fed Meeting

MCX Gold Price Forecast: COMEX gold trades marginally higher near $1672/oz weighed down by firmer US dollar and higher yields as market players position for the Fed decision today.

The US dollar index and bond yields have already risen in expectations of an aggressive move by the Fed however if the central bank fails to surprise, it is possible that we may see some correction in the US dollar which may lend some support to gold prices.

Gold and Silver might see some volatile action late in the day prior to the FOMC statement post 11:30 IST. We have seen historically volatility but the market has already discounted 75bps rate hikes in Sept and Nov. In the unlikely event that the Federal Reserve raises its benchmark interest rate by 1%, it would most certainly pressure gold to lower pricing. 2 Yr US Treasury yield hit nearly 4% which is keeping gold prices under check.  Any relief rally is only expected tomorrow as historically this year after every rate hike, we have seen gold climbing. Despite US Treasury yield and dollar moving higher, we have not seen the same selling pressure in gold on the downside indicating that sellers have exhausted and are waiting for fresh triggers. Any breakthrough below $1650 will give bears fresh ammunition for taking gold lower till $1620 but breach above $1700 will take gold till $1725-30. Safe trader’s avoid carrying any overnight position.

Gold prices inched lower as the dollar and Treasury yields firmed, and investors remained cautious ahead of a widely expected large interest rate hike by the U.S. Federal Reserve this week. Last week U.S. inflation data was reported better than expected, which  raised the probability of even a 100bps rate hike, increasing the pressure on metal prices. There is 80% probability of a 75bps rate hike according to CME fed watch tool, which the market seems to have discounted for in the prices.

Dollar and Yields have been witnessing significant gains since amidst this rate hike expectation, as the dollar continues to hover around its two decade high, while U.S. 10Y yields are steady near ~3.4% levels. Apart from the Fed, this week other central banks like BOE are also expected to keep tightening monetary policy in the face of surging inflation. Indicative of sentiment, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, have dropped to their lowest since March 2020. Apart from the interest rate, focus will also be on the comments from Governor Powell and inflation & growth forecasts. Broader trend on COMEX could be in the range of $1635-1690 and on domestic front prices could hover in the range of Rs 48,750-49,300.