With the US Dollar temporarily pausing, XAU/USD struggles for direction in anticipation of a hectic week ahead affecting Gold Price
What to Expect for Gold Ahead of US Data and FOMC Meeting
Gold prices have been steady as the market awaits a crucial week of US data points and a Federal Open Market Committee (FOMC) meeting. The FOMC meeting will be the focus for markets. The interest rate market has already predicted a 25 basis point lift in the Fed funds target rate on Wednesday.
What to Watch For
The post-FOMC press conference might hold sway as forecasts for further hikes have been all but discounted by the market. Potential cuts toward the end of the year are anticipated by rates traders. The reaction to Wednesday’s decision further out on the yield curve might see more impact for gold.
The real yield is the nominal yield less the market-priced inflation rate. Derived from Treasury inflation protected securities (TIPS) for the same tenor. Significant moves in the real yield of Treasuries may influence the price of the yellow metal. This is due to it being a non-interest-bearing asset. With a lack of direction in real yields, the broad DXY (USD) index has also been caught in a range of late.
The lack of direction in XAU/USD and the US Dollar index more generally has seen gold volatility continue to slide lower. While it jacked higher on the SVB collapse and concerns for the USA banking sector. The move lower might be an acceptance by the market for the overall higher levels of gold. The GVZ index is a measure of volatility in the gold price similar to the VIX index’s measure of volatility in the S&P 500.
What It Means for You
This week’s Fed meeting might provide the catalyst for the next move in the ‘big dollar’ and XAU/USD. If you’re interested in investing in gold, keep an eye on the real yield of Treasuries and the DXY (USD) index. These factors may influence the price of gold, which is a non-interest-bearing asset.