Markets now expect the Federal Reserve (Fed) to hike its policy rate by a total of 150 bps at the next two meetings. Economists at TD Securities believe that gold and risk markets alike could be set-up for a short-squeeze.
Sell-the-news rally could catalyze a counter-intuitive knee-jerk reaction in gold
“Careful: this Fed day, a sell-the-news rally could catalyze a counter-intuitive knee-jerk reaction in gold.”
“With markets already nearly fully pricing in two consecutive 75 bps hikes, gold and risk markets alike could be set-up for a short-squeeze, which has typically served to shake weak shorts out of the markets and spark some optimism that the worst is over, which ultimately sets the market up for the next leg lower thereafter.”
See – Fed Preview: Forecasts from 12 major banks, increasing bets of a 75 bps rate hike