The gold market (XAU/USD) is presently consolidating its position above the $1,900 threshold as the Asian trading session unfolds this Tuesday. Traders are exhibiting caution as they anticipate significant monetary policy meetings by major central banks, including the Federal Reserve (Fed), the Bank of England (BoE), and the Bank of Japan (BoJ), all scheduled to unveil their interest rate decisions later this week. These impending events have the potential to introduce substantial volatility into the market. As of the current moment, the price of gold is experiencing a marginal 0.06% decline, settling at $1,932.
The Federal Reserve (Fed) is on course to disclose the outcomes of its two-day monetary policy meeting on Wednesday. Widely anticipated to maintain interest rates within the range of 5.25% to 5.5%, the probability of the Fed retaining rates at their current level stands at a staggering 99%, according to the CME Fedwatch Tool. Nonetheless, market participants are proceeding with vigilance due to recent inflation data upswings and the U.S. economy’s sustained resilience, which could potentially lead to further interest rate hikes.
Investors will be meticulously observing the press conference led by Federal Reserve Chairman Jerome Powell, hoping for insights into the trajectory of future interest rates. It should be noted that as interest rates rise, the opportunity cost of investing in non-yielding assets increases, implying a pessimistic outlook for precious metals.
In parallel, the U.S. dollar’s relative value against a basket of six major currencies is showing signs of weakness, albeit remaining above the 105.10 level. Concurrently, U.S. Treasury yields saw a decline on Tuesday, with the 10-year bond rate dropping to 4.30% as of the current moment. The strength of the Greenback is being eroded by the dwindling yields.
Looking forward, market participants in the gold sector will be closely monitoring the Fed’s interest rate announcement, scheduled for Wednesday at 18:00 GMT. Subsequently, attention will shift to Fed Chairman Jerome Powell’s press conference at 18:30 GMT, where insights into the ‘dot plot’ and inflation expectations may be unveiled. Later this week, the BoE is set to announce its benchmark rates on Thursday, followed by the BoJ’s monetary policy meeting scheduled for Friday. These forthcoming developments hold the potential to chart a decisive course for gold prices in the near term.