With the FOMC meeting scheduled to begin tomorrow, market participants have continued the bearish market sentiment so prevalent last week. Since reaching a high just below $1300 on June 6th, gold prices have traded lower. Gold prices have continued to decline for the last four consecutive trading days.
According to the CME’s FedWatch, there is an extremely high (mid 98.96%) probability that this month’s FOMC meeting will result in an interest rate hike. In most likelihood, an interest rate hike has already been factored into the markets.
Although most analysts believe that current pricing has fully accounted for any interest rate hike, questions remain as to what the Fed will do with the 4 ½ trillion-dollar assets on their balance sheets. While it is clear that the Fed plans to begin liquidation of many of these assets, the timing and quantity of asset sales are a huge unknown.
In an interview with MarketWatch, Brian Lundin, editor of Gold Newsletter, said he believes the Fed meeting will be positive for gold, regardless of what happens.
“If the Fed raises rates as expected, it will alleviate some short-selling pressure on the metal as traders exit those positions on the news,” he said. “And if for some reason the Fed decides not to raise, it would be a significant dovish signal that would send gold even higher.”
Reference: Kitco
Thai
Eng