While markets are fully priced in for a hold on the Fed funds rate, according to Arslan Butt, Lead Commodities and Indices Analyst at FX Leaders, gold investors will be paying close attention to Powell’s comments and to the updated economic projections, also know as the “dot plots.”
“[T]he US dollar’s value, when benchmarked against six significant currencies, remains relatively stable near 105.10, recovering from its weekly low at 104.81, he said. “The US 10-year Treasury note yield has soared to a 16-year peak at 4.365%. This rise could potentially curtail further devaluations of the US Dollar .”
Butt noted that even as markets anticipate a hold in September, “projections for rate hikes in the upcoming November and December meetings have seen a dip.”Powell’s press conference “is expected to shed light on the ‘dot plot’ and provide insights into inflation projections,” he added. “It’s pertinent to highlight that elevated interest rates augment the investment costs in non-yielding assets, signaling a potentially bearish sentiment for precious metals.
Following the FOMC rate decision, which he believes “might dictate the trajectory for gold prices,” Butt said markets will turn their attention to the Bank of England and the Bank of Japan, both of which will be announcing their own rate decisions and updating their monetary policies on Thursday. The consensus forecast calls for the BoE to raise their benchmark interest rate to 5.5% from 5.25%, while markets are pricing in a hold at -0.1% from the Bank of Japan.Ernest Hoffman For Kitco News
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