After an explosive start to August, Gold prices have pulled on routine profit-taking as trader’s attention now shifts to the minutes of the Federal Reserve’s latest monetary policy meeting.

Over the last 12 months, inflation has rapidly spread to every corner of the economy with the cost of unavoidable living expenses from Food, Fuel, Housing, Clothing and Energy prices – rising at double-digit annual rates for the first time in over 40 years – further deepening the Cost-of-Living Crisis and heaping more pain on household budgets.

A string of recent much hotter-than-expected inflation readings have enviably spurred the Federal Reserve’s efforts to restore price stability, which intensified in June after officials abandoned previously-laid plans to deliver a half-point interest rate hike and instead dropped a bombshell on the markets by raising interest rates by a “super-sized” 75 basis points.

In July, the Federal Reserve raised interest rates by another super-sized 75 basis points for the second month in a row.

The latest rate hike means the central bank is in the throes of the most aggressive cycle of monetary tightening since 1981. It follows a 50 basis point rate hike in May and a 75 basis points rate hike in June – the first of that magnitude since 1994.

There’s no denying that we are in an environment, where the Federal Reserve is faced with a tough choice: record high inflation or the risk of recession. Faced with that choice, the Fed’s recent actions clearly signal they have chosen a recession.

After raising interest rates by a whopping 200 basis points at its last three consecutive meetings, Fed Chairman Jerome Powell signalled that another super-sized hike could be on the cards for September.

In fact, those odds hardened on Tuesday after Natural Gas prices on both sides of the Atlantic blasted through all-time record highs.

European Natural Gas prices soared to a high of €251, while U.S Natural Gas prices skyrocketed above $9.45 – notching up a whopping gain of over 350%, from this time last year.

Put another way, that’s the equivalent of both benchmark futures contracts now trading at more than $400 a barrel of Oil.

As traders know – there is a strong correlation between Inflation and Energy prices.  When Energy prices accelerate at a red-hot pace, so does Inflation.

Even Jerome Powell himself admits that “one of the biggest challenges faced by the Federal Reserve, which they really can't do anything about it – is elevated Oil and Energy prices”.

Looking ahead, all eyes will be on the Federal Reserve's July Monetary Policy Meeting Minutes, scheduled for release on Wednesday.

With inflation spiralling out of control, expectations are now running high that the Fed could be forced to raise interest rates aggressively again next month. Traders will be scrutinizing every word of the minutes for clues on the size of the Fed's next rate hike, which will likely open the door for fresh volatility ahead.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays below 0.9800 after US inflation data

EUR/USD stays below 0.9800 after US inflation data

EUR/USD continues to trade in negative territory below 0.9800 in the American session on Friday. The data from the US showed that the annual PCE inflation declined to 6.2% in August but the stronger-than-expected core reading didn't allow the pair to gain traction.

EUR/USD News

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD fell to a fresh daily low below 1.1030 but managed to reverse its direction and climbed above 1.1100 during the American trading hours on Friday. The pair remains on track to snap a two-week losing streak despite having suffered heavy losses earlier in the week.

GBP/USD News

Gold extends daily rally beyond $1,670

Gold extends daily rally beyond $1,670

Gold preserved its bullish momentum and rose above $1,670 after the mixed inflation data from the US on Friday. The benchmark 10-year yield is down more than 2% as markets look to wrap up the third quarter, fueling XAU/USD's daily rally. 

Gold News

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shytoshi Kusama, the project lead for Shiba Inu, has dropped a teaser about Shiba Eternity games for the SHIB community. Proponents expect the launch of the collectible card game to be a bullish catalyst for Shiba Inu price. 

Read more

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

Equity markets remain at the precipice of a technical collapse, which we examine in the weekly long-term chart below. The overall picture remains one of nervousness ahead of the upcoming Q3 earnings season.

Read more

Majors

Cryptocurrencies

Signatures