- Gold might go up on recession fears and Fed rate decisions.
- ECB Announces ad-hoc Meeting to Address Bond Market Turbulence
· Crude oil is softer ahead of the Federal Open Market Committee (FOMC) meeting today.
Gold might go up on recession fears and Fed rate decision.
Gold found some support after the week’s significant drop towards $1800/oz. The U.S. dollar is trading slightly lower thus boosting gold prices ahead of the Fed’s interest rate decision today. The Federal Reserve’s largest rate hike in 28 years could be coming later today at 2 PM EST.
The question is what will happen to the price of gold—an asset labeled as a hedge against inflation but that relationship has broken down lately due to the runaway strength in rivals, the dollar and US Treasury yields. Retail sales will be higher than 0.2% could add to the already hawkish narrative, leading to a stronger dollar and weaker gold.
The revision higher sourced from last week’s U.S. inflation beat and should the Fed go against its own guidance, distrust for the central bank may begin to fester which could increase uncertainty and volatility in future meetings. The Fed is anticipated to raise rates by 75 basis points (bps) at today’s meeting, up from 50 bps expected at this time last week.
The headline CPI number of 8.6% year-on-year to the end of May outstripped the 8.3% forecast. Traditionally, this should weigh negatively on gold prices but with talk of stagflation and an impending recession, bullions safe haven allure may come to the fore and allow the yellow metal to remain somewhat buoyant in the face of a ballooning dollar.
ECB Announces ad-hoc Meeting to Address Bond Market Turbulence
The euro jumped after the ECB’s governing council said it would hold an emergency meeting on Wednesday to discuss the recent sell-off in government bond markets. The ECB have announced that they will hold an ad-hoc Governing Council meeting in order to discuss the current market conditions. This will include the somewhat disorderly price action across the global bond market. The meeting will take place at 10:00 BST, however, it is not known whether a statement would be released.
Crude oil is softer ahead of the Federal Open Market Committee (FOMC) meeting today.
Crude oil is softer ahead of the Federal Open Market Committee (FOMC) meeting today. OPEC’s monthly oil market report has an increase in their demand forecast of 3.1 mnbbl/day for the rest of the year. Supply and capacity constraints aside, the market is starting to focus on potential economic activity slowing down with super-charged rate hikes imminent around the globe. Chinese data beat forecasts with industrial production coming in at 0.7% year-on-year instead of -0.9%. Retail sales was -6.7% for the same period rather than -7.1%. European natural gas prices surged on the back of a US LNG plant outage being extended. The US will see mortgages, housing and retail sales numbers.
