Gold Price Outlook Depends on Fed Rate Decision and Forecast
Gold Price Talking Points
The Federal Reserve interest pricing decision playing September 22 is likely to influence the near-term outlook for the price of gold as the central bank appears to be on track to reduce monetary support.
Fundamental Gold Price Forecast: Neutral
The price of gold traded at a new monthly low ($ 1,745) before the quarterly meeting of the Federal Open Market Committee (FOMC) like the best than expected U.S. Retail Sales Report fueled speculation about an imminent change of fed Politics, and new developments emanating from the central bank could weigh on bullion if the president Jerome Powell and Co. propose an interim exit strategy.
Plans to reduce purchases of treasury and mortgage-backed securities (MBS) are expected to dampen the appeal of gold as it indicates rising U.S. interest rates, but bullion could see a fate more bearish if the central bank is more willing to normalize monetary policy sooner rather than later.
The update of the Summary of Economic Projections (SEP) may reveal a significant change in the outlook for monetary policy, the slowdown in the United States Consumer Price Index (CPI) reinforces the Fed’s expectation of a transitory rise in inflation, and an upward revision of the interest rate point chart could push the price of gold to new monthly lows as the president Powell and Co. is currently planning two rate hikes for 2023.
However, the same from Fed officials may support the price of gold as market participants place bets on higher interest rates, and bullion may trade within a range set to short term because it defends the March low ($ 1,677) in the second half of the year.
Having said that, the rebound from August low ($ 1,682) may turn out to be a broader trend correction rather than a change in market behavior as the FOMC appears to be on the right track to shift gears, and a significant change in Fed policy could weigh on bullion as market participants brace for a hike in US interest rates.
— Written by David Song, Mint Strategist
Follow me on Twitter at @DavidJSong