The big challenge for gold as Fed meets [Video]

Giles Coghlan LLB, Lth, MA Financial Source

As we start the week there is a big challenge for gold. Last week’s hot CPI print led to increased expectations of a 100bps rate hike. Short Term Interest Rate Markets now see around an 85% chance of a 100bps hike. That sudden shift of expectations led to the dollar index moving higher and real yields too. As a result we saw gold immediately plunge lower. This would be expected as gold tends to move inversely to real yields and the USD.

The question as we start the week is will that selling continue into the Fed meeting on Wednesday?

Once we get to Wednesday we need to be very sensitive to change. If the Fed end up hiking by only 75bps and/or take a more dovish stance, we could see some sudden reversal in gold’s recent falls.

Major Trade Risks: The major risk here is that gold gains on position squaring ahead of the FOMC event.

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Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

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