Gold Awaits FOMC Meeting Today

Is It Time to Sell Your Gold? Fed Rate Hike In Highlights

Posted Wednesday, June 13, 2018 by
Arslan Butt

Gold prices are steady above $1,294, with the lower boundary of $1,294 – $1,301 as trading range. Investors seem to wait for the conclusion of the U.S. Federal Reserve’s meeting later today for the interest rate decision and for the clues on future interest rate hikes. So, is it going to impact gold prices? Yes, it is and the movement is likely to be very sharp and aggressive.

As explained in FX Leaders June 13 – Economic Event’s Brief, the Fed rate hike is essentially a done deal which is why I believe that gold can take a bullish turn on the anouncement of the 2% rate hike.  It’s a ‘buy the rumor, sell the fact’ scenario. Investors have already traded 2% rate hike as we have been aware of June’s rate hike since March 2018.

Key Points to Focus & Potential Impact on Gold

1) Increase in interest rates by 25 basis points is coming. Gold is likely to take a deep dip before it reverses to a new intra-day high.

2) We should stay open to the possibility of two additional rate hikes in 2018. That being said, the next hike could come as early as September (instead of December). It’s going to be a messy situation for gold bulls as there’s a nice probability of heavy sell-off in the yellow metal.

3) Fed can maintain the baseline of a total of three hikes for 2018 which is going to hurt dollar buys. Gold prices can take a bullish turn on that decision.

 

Gold – XAU/USD – Quick Technical View

As we know, the precious metal gold is stuck in a narrow trading range of $1,294 – $1,301. But the time has come when we can expect a breakout. 

Gold 4 - Hour Chart

Gold 4 – Hour Chart

The violation of $1,294 can lead gold prices towards $1,289 and $1,281. Whereas, the bullish breakout will open a room for buying until $1,307 and $1,317 today. Investors will be watching very closely to see if there’s any forward guidance that will intimate a possible fourth rate hike into the year-end.

Good luck and stay tuned for forex trading signals!

 

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About the author

Arslan Butt is our Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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