The Fed will be crucial for the price of gold this week
Pressure is mounting on the price of gold which broke key support at $1900 last week as real rates rose. The ounce of gold is now trading at a two-month low, at 1890 dollars, and could continue to fall after the Fed meeting on Wednesday evening.
The Federal Reserve Committee is expected to adopt an even more hawkish tone than last time by notably increasing the range of its key rates by 50 basis points and giving more details on its plan to reduce the size of the bank’s balance sheet. central. The FOMC could even raise rates by 75 basis points on Wednesday due to the persistence of inflation, which would put significant pressure on gold given the current low probability of this scenario.
In the longer term, the price of gold remains threatened by the rise in real rates, especially short rates, because the shortest rates are much more dependent on the Fed’s monetary policy and much less on the economic outlook than the long rates. Currently at -0.5%, the real 5-year rate could therefore continue to rise to reach at least 0% in the coming months, as the Fed tightens its monetary policy to calm inflation.
However, the price of gold could experience rebound episodes in the event of a new surge in energy prices and/or fears about the short-term economic outlook.
Gold Price Daily Chart – Key Levels