Gold Holds Steady as Markets Await Fed Meeting, Clarity on Evergrande
Aiswarya Gopan • 2 min read
On Tuesday, gold prices are holding steady as investors cautiously wait to see if the Fed will announce a timeline for when it could start tapering its asset purchase program during the upcoming policy meeting this week. At the time of writing, GOLD is trading at a little above $1,761.
Following the release of promising economic data from the US over the past week, investors are increasingly expecting the Fed to provide some clues on when it could overturn its dovish monetary policy and consider raising interest rates again. Investors will closely monitor the latest forecasts for economic growth over the next three years to gain an understanding on a possible timeline for the first rate hike since the onset of the coronavirus pandemic in early 2020.
Even as investors adopt a wait and watch approach before entering new positions in the precious metal ahead of Fed’s meeting, the safe haven appeal of the commodity receives a boost from the rising uncertainty with regards to China’s Evergrande and whether it will default on its massive debt. This has driven a risk-averse mood among investors at the moment, which is supporting the safe haven gold but is also helping strengthen the US dollar, which in turn is keeping the yellow metal’s gains in check. As we know, the commodity shares a negative correlation with the greenback as a stronger USD makes it more expensive for holders of other currencies to purchase bullion.
Gold prices could face some pressure to the downside from recent comments from ECB board member Isabel Schnabel during the previous session. Schnabel shared an optimistic view on the progress of economic recovery across the Eurozone, adding that the volume of ECB’s bond purchases is becoming less important as a result even as its money-printing scheme could become more important to gauge the right time to consider increasing interest rates again.