Most analysts and traders expect the Federal Open Market Committee (FOMC) to vote for holding the rates as they are.
The prices of gold moved up on Wednesday as the dollar weakened while the world awaits a decision from the Fed. The slowing US inflation solidified assumptions that the Fed would keep interest rates unchanged later in the day, causing gold prices to soar. While the spot gold added 0.03% to $1,948.49 per ounce by 5:00 GMT, the US gold features also rose 0.2% to $1,961.70. The diminishing USD was a time for overseas buyers to seize the opportunity.
The US consumer price index climbed 4% in May, it was its smallest annual increase over two years. On the other hand, it outperformed the Federal Reserve’s target of 2%. This signifies that inflation has moderated in recent times, and this caused the Federal Reserve to consider taking a pause on the interest rate hike. A chief economist at ACY Securities, Clifford Bennett, noted that “the Fed, while it may pause at this meeting, will certainly maintain a tightening bias for the foreseeable future (given core CPI is at 5.3%)”.
Gold Prices Move Up While Fed Pauses on Interest Rates Hike
Notably, the meeting held by the Fed’s officials ended with no predicted rate hike. The meeting was their first in 15 months, and it happened on Tuesday, 13th June. According to CME’s FedWatch Tool, the markets are betting on an 80% chance that the US central bank will maintain the current rates. Most analysts and traders expect the Federal Open Market Committee (FOMC) to vote for holding the rates as they are.
However, there is room for a possible increase in the coming month. In a note to clients, Goldman Sachs (NYSE: GS) economist wrote that “the Fed leadership has signaled that it sees pausing as the prudent course because uncertainty about both the lagged effects of the rate hikes it has already delivered and the impact of the tighter bank credit increases the risk of accidentally overtightening”.
The chief economist commented:
“Growing realisation that the Fed is unlikely to cut rates for the rest of this year, has seen a lot of investors exit the gold market of late. The price action in the recent range has been a cause for caution, but it does look as though the buy side is going to win out in this epic struggle.”
As for the global head of ABC Refinery, Nicholas Frappell, the Fed will determine the gold prices. While he said the current bullish move would likely be for some time, Frappell added that the Fed’s decision could make changes.
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