• 108 days Will The ECB Continue To Hike Rates?
  • 108 days Forbes: Aramco Remains Largest Company In The Middle East
  • 110 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 510 days Could Crypto Overtake Traditional Investment?
  • 514 days Americans Still Quitting Jobs At Record Pace
  • 516 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 519 days Is The Dollar Too Strong?
  • 520 days Big Tech Disappoints Investors on Earnings Calls
  • 521 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 522 days China Is Quietly Trying To Distance Itself From Russia
  • 523 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 526 days Crypto Investors Won Big In 2021
  • 527 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 528 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 530 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 530 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 533 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 534 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 534 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 536 days Are NFTs About To Take Over Gaming?
Is A Massive Gold Rally On The Horizon?

Is A Massive Gold Rally On The Horizon?

Gold prices have fallen from…

Oil Demand Falters On New Wave Of Lockdowns

Oil Demand Falters On New Wave Of Lockdowns

Road traffic and transportation fuel…

The Gold Rally Has Finally Run Out Of Steam

The Gold Rally Has Finally Run Out Of Steam

This year has been incredible…

Mining.com

Mining.com

Mining.com

MINING.com is a web-based global mining publication focusing on news and commentary about mining and mineral exploration. The site is a one-stop-shop for mining industry…

Contact Author

  1. Home
  2. Commodities
  3. Precious Metals

Gold Hangs At $1,300 Ahead Of Fed Meeting

Gold

Wednesday's Federal Reserve Open Markets Committee (FOMC) meeting is expected to confirm market expectations that the Federal Reserve will remain on hold for the rest of the year. This decision could have significant implications on the gold market, according to analysts at the World Gold Council (WGC).

Monetary policy dictates gold price

Historically, monetary policy has been a key catalyst for changes in gold price. "When the Fed has shifted from a tightening to a neutral stance, gold prices have increased, even if this effect has not always been immediate," WGC analysts note. Interest rates have become more influential relative to the value of US dollar, which is another deciding factor in gold performance.

This is especially true when the FOMC changes its policy stance because the market expectations will also adjust, and more uncertainties will emerge. In this case, holding rates steady instead of keep tightening (rate hikes) could have a positive effect on gold performance, albeit not for the short term. Effects after a transition in policy are not felt immediately due to several reasons: uncertainty over when hiking may resume, investors shifting toward safe fixed-income assets, and uncertainties over currency and inflation. Related: Russian Metals Magnate Sues U.S. Over Sanctions

However, reports from the World Gold Council indicate that "gold does perform better in a post tightening cycle." Gold investors may need to be patient as the period over which this occurs does vary. For instance, gold rose by 3.6 percent in 2001, 12 months after the Fed put a hold on interest rates, but rose by 7 percent in 2007 only one month after policy change.

Global risks give reasons to buy gold

A more dovish stance by the Fed, coupled with the ongoing trade talks between the US and China, could also contribute to a slowdown in US dollar appreciation, which could add to gold's momentum. Elsewhere, the European Central Bank's extended asset purchase program, as well as uncertainties surrounding Brexit, have provided additional risks in the global financial market. This may be good news for investors looking at gold for diversification and liquidity in a more turbulent market environment, the WGC reports.

By Mining.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment