Gold opened down on Wednesday due to forthcoming guiding principles and policies by US Federal Reserve. Moreover, an increase in US Treasury yields injured the demand for the shining yellow metal. All eyes on FOMC meet.
We are expecting a big hike in interest rates which tends to be a fruitful step in curbing the inflationary periods. Furthermore, on Wednesday FED may increase the rate of interest by half a percentage to bring down the increased inflation. Therefore, their main focus was to chop down the inflation rate.
For the first time in three decades, FED is all set to take a drastic step thereby attacking inflation and making the borrowing cost higher for loans. Consequently, a person should pay more for a home, car, business deals, or credit card purchase.
As soon as the meeting ends on Wednesday, the FED may announce a hike of half percentage in interest rates. Moreover, in the month of June, we may expect another hike in interest rates which can be followed by another month also.
Now, what will happen today in the FED meet? Do the policymakers will raise the interest rate by 0.50 BSP or 0.25 BSP or may increase in the subsequent months?
However, all eyes are on the outcome of today’s FED meet. If the interest rates actually rose by 0.50 BSP then we may see pressure on gold prices. Gold may fall down for some period but later on will gain the strength and pull back the prices thereby indicating an upward trend. After the indication,
Gold prices already discounted the interest rate hike of 0.50 bps. As discussed above the FED will increase the interest rate up to 2%—2.55 but this is unlikely because the US economy is unlikely to sustain at the higher interest rate. If inflation controls then they will reduce interest rates rapidly.
Furthermore, if the interest rate remains unchanged today then a sharp recovery in gold prices and equity markets will be seen.
Last but not least if the rate of interest increases by 0.25 bps then we may see a bit of downfall which later on leads gold prices to a recovery mode and the rest of the market will react accordingly.
On the contrary, looking at the dollar index, USD is making a history of highs. Consistently, the dollar is moving in its upward trend which usually moves inversely with the price of gold. The dollar index is facing a resistance of 104.00 levels.
Here, we recommend our traders and subscribers to stay away from the market as it will remain silent for the day and we expect movement after the FED policy and statement.