Gold is in wait-and-see mode ahead of the Federal Reserve policy announcement. Strategists at TD Securities expect the yellow metal to rise if the Fed delivers the expected 50 bps rate hike before resuming its downmove.
Highly-anticipated FOMC day could translate into a whipsaw for many gold bears
“It's FOMC day, and sentiment across global markets is pervasively negative with the Fed set to embark on an aggressive quantitative tightening path and to hike rates by 50bp.”
“The Fed's move has been well telegraphed, and global market participants are well-positioned for it. In this context, we could potentially expect a ‘buy-everything-rally’ if the Fed hits the mark relative to expectations, as consensus positioning across global markets is flushed out amid pervasively negative sentiment. This would suggest a bullish knee-jerk reaction in gold – but make no mistake, it would necessarily be caused by a dovish Fed.”
“It is also worth noting that consensus positioning in the yellow metal remains to the long-side, pointing to some complacent length amid the war in Ukraine, which would limit the implications on gold.”
“Ultimately, the highly-anticipated FOMC day could translate into a whipsaw for many gold bears, before prices resume their downward trajectory.”