A rate hold is projected for today. But the real news is what happens after the rate decision — Fed’s Powell will deliver guidance.
- Gold prices XAUUSD advanced for the second straight day today, eclipsing the $2,420 level, up more than $40 from yesterday’s opening level of $2,377 per ounce. Elevated dealmaking among gold bugs is taking place hours before the Federal Reserve updates its key interest rate decision. On deck for today, America’s central bankers are expected to keep the benchmark rate flat at 5.50%.
- Against that backdrop, gold prices shot higher, riding on the conviction that — while rates may stay flat today — the Fed will crack the door open to a possible September rate cut. Lower borrowing costs are generally beneficial to gold, which is a non-yielding asset, i.e. it doesn’t compete against fixed-income assets that generate passive yield. Instead, it performs relatively well in a low interest-rate environment due to the reduced opportunity cost.
- With this in mind, traders will be paying special attention to Fed boss Jay Powell who will take the podium moments after today’s rate decision. The top Fed official will be peppered with questions surrounding the central bank’s next move and his answers — as usual — will most likely move the markets. Expect heightened volatility in the price of gold (and some trading opportunities) as traders react to today’s events.
