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Gold Investors Should Keep An Eye On Fed Policy

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” The current environment might continue to increase the appeal of gold amid the approaching changes in Fed policy. The price for bullion may exhibit a more bullish behavior over the coming months as the FOMC abandons hawkish forward guidance for financial policy,” the experts at DailyFX said.

Although the market is off Mondays one-month highs, gold costs are holding on to most of its recent gains. June gold futures last traded at $1,296 an ounce, down 0.45% on the day.

Financial uncertainty fueled by growing trade stress between China and the U.S. is producing some momentum in the gold market; looking ahead one research study firm said the metals next rally might come from the Federal Reserves moving monetary policy.

In a second-quarter gold forecast report, market experts David Song and Michael Boutros at DailyFx stated that they expect to see greater prices through the 2nd quarter as the Federal Reserve adjusts its forward guidance.

Not only is the reserve bank stopping the relax of its balance sheet but the analysts stated that they anticipate the committee at the June financial policy meeting to lay the groundwork for “lower-for-longer” financial policy, another bullish factor for the yellow metal.

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The analysts comments reflect a market that sees the growing possibility of a rate cut by the end of the year. The CME FedWatch Tool reveals that markets are pricing in a 70% possibility that the Federal Reserve will cut rates by December, a substantial boost from last week where markets saw an approximately 50/50 possibility.

Looking at golds technical price action, the experts stated that although there is initial resistance at $1,327 an ounce, they are viewing the February highs at $1,350 carefully. They included that any pullback to $1,275 or $1,263 an ounce need to be seen as a purchasing opportunity.

” The rate for bullion may ultimately trade to fresh annual highs as the reserve bank strategies to wind down the $50B/month in quantitative tightening (Q.T.) beginning in May,” the experts said.

” Keep in mind, the Federal Open Market Committee (FOMC) advocates a patient approach amidst the mixed data prints coming out of the U.S. economy, however the reserve bank may have a challenging time in defending the wait-and-see method for financial policy as the inversion in the U.S. treasury yield curve cautions of a looming recession,” the experts said.

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