The Federal Reserve is due to release the statement from their March meeting. Also, general elections are held today in the Netherlands. What can we expect from these two events and how can they affect the gold market?
All indicators suggest that the Fed is likely to hike interest rate today. The inflation rate has picked up recently, while the latest data on employment has beaten expectations. The Fed officials have been talking about a rate increase like crazy and the market odds of an upward move are about 90 percent. Even Mario Draghi, the ECB President, was very kind and adopted a more hawkish stance, weakening the U.S. dollar a bit and making more room for a hike. Therefore, the Fed has no choice but to hike. What is more interesting is whether the Fed will provide another hawkish signal about future tightening. Right now, investors expect the second hike in June and the third one in December. If these expectations shift, the price of gold may react. There should be no big changes from the latest Economic Projections, but the Fed is likely to sound a bit more hawkish than in December.
How the FOMC statement could affect gold prices? Well, there may be a “sell the rumor, buy the fact” scenario, which we have seen during previous increases (however, investors should remember that a December Fed hike initially pushed gold down). Such reaction may be strengthened by the possible victory of Geert Wilders in the Dutch elections. The latest polls show that he is neck and neck with the current Dutch Prime Minister (although his Party for Freedom seemed to lose some support due to the aggressive stance of the Dutch government in the recent diplomatic dispute between the Netherlands and Turkey). However, as we learned last year, polls underestimate the chances of the populists winning. Hence, Wilders’ triumph would not surprise us, but it may not be enough to form a ruling coalition. On the other hand, his loss would decrease the political uncertainty in Europe, which could trigger some outflows from gold, the traditional safe haven. One thing is certain: this week may be really hot for the gold market – stay tuned! If you are interested in taking advantage of today’s uncertainty, you will find the details and our strategy in today’s Gold & Silver Trading Alert.
If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.
Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
Thank you.
Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor
Gold News Monitor
Gold Trading Alerts
Gold Market Overview
