Gold Price Consolidates Ahead of Fed Decision
Gold prices (XAU/USD) are consolidating around the $1,930 mark during the Asian trading hours, as investors remain on the sidelines, awaiting the Federal Reserve’s (Fed) Interest Rate Decision and FOMC Press Conference. These pivotal events have the potential to trigger significant volatility in the market.
Dollar Steadies, Yields Surge
A gauge measuring the strength of the US dollar against six major currencies is holding relatively steady near 105.10, recovering from a weekly low of 104.81. In contrast, the yield on the US 10-year Treasury note has surged to its highest level in 16 years, hovering at 4.365%. This uptick in yields could limit the downside of the US Dollar (USD).
Fed Expected to Maintain Rates
The Federal Reserve (Fed) is poised to announce the outcome of its two-day monetary policy meeting on Wednesday, with widespread expectations that interest rates will remain in the 5.25% to 5.5% range. According to the CME Fedwatch Tool, there is a 99% probability of rates staying unchanged in the September meeting. However, the likelihood of further rate hikes in the November and December meetings has diminished, according to the same tool.
Powell’s Press Conference Crucial
Fed Chairman Jerome Powell’s press conference following the decision will be closely watched, as it is expected to provide insights into the ‘dot plot’ and inflation expectations. It’s essential to note that rising interest rates increase the opportunity cost of investing in non-yielding assets, which could spell a negative outlook for precious metals.
Market Focus on Fed Decision
Gold traders will have their eyes fixed on the highly-anticipated Fed interest rate decision, scheduled for Wednesday at 18:00 GMT. This event is likely to set the tone for gold prices in the near term. Later in the week, the Bank of England (BoE) will announce its benchmark rates on Thursday, followed by the Bank of Japan’s (BoJ) monetary policy meeting on Friday. These central bank decisions collectively shape the direction of global financial markets, making them key events to watch for investors worldwide.