Gold ahead FED meeting

Can bears get calmer? 

Market analyst – IFC Markets

The week ahead will be amazing and crazy. While central banks meetings warming up the week, we have so much economic data that need or serious attention. 

Federal Reserve will start its two-day meeting on Tuesday, and the closing statement with press conference will be on Wednesday evening. However, it is not just in the US. Central banks in most developed and developing economies will have monetary policy meetings and interest rate decisions. PBOC, BoJ, SNB, BCB, BoE, CBRT, respectively, in China, Japan, Switzerland, UK, and, Turkey are the most important meetings of the week. Reserve Bank of Australia also will publish its meeting minutes on Tuesday. 

Gold traders must follow the economic data as well, especially US housing data and PMI numbers in Europe and the US. 

As we saw over the past year, and after that Gold touched its record highs above $2,000, its gradual decline began with fewer recoveries from falls. The reason for this slow reduction is interesting. After that economy started to recover, stock markets had better returns on investment, so less demand for Gold, and it was causing a gradual decline. On the other hand, increasing weakness in the economy and higher risks always was supportive of the US dollar as one of the safe havens, and stronger USD always limited the Gold bulls on its recovery path. 

Based on what happened over the year-ago, whatever happens, this week, most probably we can see another weekly decline at the end, even though if it would be limited with some other news and events. 

On the other hand, in the coming week, we have the FED meeting and as we saw in FOMC member’s speeches over the last week, there are many differences of opinion about the time to start tapering. While economic data show strong recovery, last Thursday, labor market data was a bit disappointing and again highlighted the difficulties that the labor market facing in recovery mood. In any case, it is not likely to see tapering start before December. Based on disagreements between the members, it is not also logical to expect a strong statement. And the absence of a taper announcement will limit the USD and bond yields, which can lift the Gold in the short term. 

Gold Analysis


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