Gold Prices Can See These Numbers! – Cryptokoin.com

Gold prices rose sharply and climbed above $1,800 as US CPI data came in below expectations. However, traders and investors will have to break through the threshold of central bank monetary policy meetings.

Powell’s speech will be important with the Fed’s interest rate decision

Right now all the attention is on the Federal Reserve, which will announce its monetary policy decision on Wednesday. According to consensus forecasts, the Fed will slow the rate hike rate by 50 bps. Thus, the Fed will reduce the Funds rate between 4.25% and 4.50%. But commodity analysts say gold will be sensitive to the central bank’s rate estimates. In September, the bank saw interest rates peak at 4.6%. Markets expect the terminal rate to rise further in this latest update.

CIBC senior economist Avery Shenfeld predicts the Fed Funds Rate will now peak at 5%. At the same time, Shenfeld warns that Fed Chairman Jerome Powell may also take a hawkish stance. In this context, the economist makes the following statement:

Powell’s press release is likely to emphasize that central bankers will need to maintain this tight stance until 2023 if the slowdown in growth, contrary to what markets are pricing in, is to loosen enough to hold inflation steady in 2024.

How will gold prices move?

For the gold market, some analysts warn that a final rate above 5% will likely put some selling pressure below it. However, they state that a move towards 5% would bring it closer to market expectations. The CME FedWatch Tool shows markets that interest rates peaked between 5.00% and 5.25% in the first half of next year.

Gold is likely to see some selling pressure. However, some analysts say any dip will be a buying opportunity. The Fed has room to raise interest rates. Even so, economists say they are nearing the end as recession fears grow. Andrew Hunter, senior US economist at Capital Economics, comments:

President Jerome Powell will try to ensure that the move is not interpreted as a dovish ‘pivot’. It is also possible that the Fed’s new forecasts will show rates a slightly higher peak than before. However, we continue to think that a sharper fall in inflation and economic weakness will convince the Fed to start cutting rates again before the end of next year. Also, we do not anticipate interest rates to rise above 5%.

Gold prices

BOE is next after Fed.

After the Fed meeting, the focus will quickly shift to the Bank of England’s (BOE) monetary policy decision on Thursday. Economists expect the BOE to raise interest rates by 50 bps to 3.50%. At the same time, markets are predicting the central bank’s final interest rate of around 4.6%. While the UK economy is expected to struggle through to 2023, significant fear and uncertainty stemming from October’s market fluctuations eased as we entered the new year. Market analysts at TD Securities explain:

A cloud of dust settles on Britain’s political floor. It is possible for the BOE to go back to business as usual, focusing on returning inflation to the target. Meanwhile, MPC continues to shy away from any real guidance on where they see the final rate. However, it is possible that this provides a slightly more predictable path to policy rate.

ECB’s decision may also have an impact on gold prices

The last Group of Seven central bank to adjust monetary policy will be the European Central Bank. Markets expect the ECB to raise interest rates by 50 bps to 2.50% on Thursday. At the same time, markets see a 20% chance for a 75 bps move. In addition to the Fed’s decision, the ECB’s decision is likely to affect gold prices. Analysts say ECB Chairman Christine Lagarde risks weakening the US dollar against the euro by a more hawkish tone than expected. A weaker US dollar will be supportive for gold prices.

Economists point out that the ECB may be more aggressive than the Fed because it has only one task: price stability. While the ECB has room to raise interest rates in 2023, many analysts predict a top of 3%. Currency analysts at Brown Brothers Harriman note:

The swap market continues to price the peak policy rate close to 3.0%, down from 3.5-3.75% after the October decision. Of course, President Lagarde’s press conference will be very important. It will also likely signal a new increase at the next meeting on Feb. But the ECB will turn before the Fed and lower rates.

What are the side shows?

In other central bank moves next week, both the Swiss National Bank and Norway’s central bank will meet on Thursday. Markets expect the SNB to raise interest rates by 50 bps to 1.0%. It also predicts that Norges Bank will raise interest rates by 25 bps to 2.75%.

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