Marex Spectron Bullion Thoughts

Gold has continued to trade within the range that I talked about a month ago, from 1310-1360. Ahead of tonight’s Fed announcement we have seen long liquidation, but once again the market has held admirably on the lows. However, it now becomes all about tonight and the scenarios and possible outcomes are as follows.

As expected by almost everyone, the Fed hike rates by 0.25%. This, as I say, is expected and as such should not create too much turmoil in the market. Gold may well have a kneejerk reaction on the downside, but I would view this as an opportunity to buy. Alternatively, the Fed doesn’t raise, which will catch pretty much the entire market on the hop and gold will rally fast. However, given the Fed’s dislike of market turmoil, I find the latter scenario extremely unlikely. But as always with anything Fed, there is a caveat here. At the same time as the announcement there is an accompanying economic forecast for the year ahead, followed by Jerome Powell’s first press conference post FOMC as Fed chairman . This will be even more closely scrutinized than the rate announcement itself. Essentially what we are looking for is how many rises the Fed sees coming for the rest of the year. In December 2017, the Fed’s median projection was for three rate rises this year, but there is a growing school of thought that they may change this to four. If they stick with three, good for gold, if they go for four, bad for gold. Also pay attention to other wording in the release and of course to what is asked and answered afterwards in the press conference.

So, a lot to be aware of at 6pm this evening London time and expect thin and nervous markets ahead of this, followed by some pretty silly moves I would expect. I will try and make sense of whatever has come out tomorrow morning and see what it means for gold.