Wednesday’s Federal Reserve meeting will also be a meeting where the Fed outline their dot plot on rate projections.
Interest rate markets are expecting no change from the Fed on Wednesday, so the forward guidance from the dot plot is going to be crucial in determining the Feds intended rate path. Inflation expectations are falling, but the US economy is still strong, so they could be room for one more rate hike this year and a higher rates for longer message.
The best situation for gold would be if the Federal Reserve indicated they can stop hiking interest rates and started to express concerns about the prospects of US economic growth. If the Fed did this, you would expect the dollar to fall, US yields to fall, and gold to move higher, However it is unlikely that they give such a clear messages like this.
It is worth being aware of a seasonal pattern for gold out of the Fed’s meetings over the last 15 years. Gold has gained over 55% of the time in the 15 days after the Federal reserve’s meeting. The average return has been 0.42% and the maximum game has been 13.97%. So with inflation expectations falling – will this be enough to decrease Fed hiking expectations and lift gold in the 15 days after the Federal reserve meeting?
Major Trade Risks:
The major trade risks here would be if the Fed signal a higher for longer message.
Remember don’t just trade it, Seasonax it!