Considering Multiple Scenarios – How to Trade Gold Today?
Arslan Butt • 1 min read
Good afternoon. Yesterday, Gold traded exactly inline without forecast to hit take profit at $1,237. However, our long-term position seems to be in the red zone. Anyhow, are you in trade of Gold or are you looking to trade Gold today? Then, you should read this article…
Fed Monetary Policy Review
As we discussed already, the central bank of the United States will be releasing the Fed Fund Rate. The interest rate is highly anticipated to increase by 25 base points from 1.25% to 1.50%. So, where is what we need to expect from Gold.
Hawkish Policy & Fed Rate Hike
If the Fed releases the rate decision with no surprises and increases the interest rate to 1.50%, then we will see a spike in the greenback. Consequently, the Gold prices can drop to $1,236, $1,227 and $1,218.
Is this rate hike already “priced in”?
Fellas, one view is that the 1.50% interest rate is already priced in. Investors have already discounted the Gold prices to get maximum benefits and later on the news release, they might take profits.
Gold – Daily Chart
This is what we call to sell the rumor, buy the fact. So better be ready for reversals as well. The market can reverse to $1,251, $1,259 and $1,266 on the breakage of $1,246.
Dovish Policy & Fed Keeps Rate Unchanged
Another scenario is that the US central bank surprises the market by keeping the rate on hold at 1.25%. In my opinion, it’s more suitable scenario to trade the market. The precious metal will be skyrocketing and we can blindly target $1,270-85. So, whatever you do, make sure to follow risk management. Lastly, do review our Dec. 13 – morning brief as well for more reviews on the FOMC. Good luck!