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Gold prices have reached their highest level since June 15 on Wednesday, supported by the expectations of a US Federal Reserve and by uncertainty as to the outcome of the US trade negotiations. high level between the United States and China. The global economic downturn is another theme that drives up prices. This theme goes hand in hand with business discussions, so let's call this event the most important event of the week.
At 9:54 GMT, April Comex gold futures are trading at $ 1318.70, up $ 3.50 or + 0.26%.
Global economic slowdown
Gold has been buoyed since China's announcement of weak GDP for 2018 and the International Monetary Fund (IMF) lowered its economic forecasts for 2019 and 2020 last week. The summary evaluations of the Bank of Japan and the European Central Bank also contributed to this success. Traders are now waiting for the Fed to acknowledge the same weakness by being dovish in the interest rate decision, the announcement of monetary policy and Fed Chairman Jerome Powell's press conference.
The Fed should do its dovish, but Powell will soften the tone
At 19:00 GMT, the US Federal Reserve will close its two-day meeting with its interest rate decision and its monetary policy statement, followed by a press briefing by President Jerome Powell.
The Fed should largely leave its key rate unchanged. While the expected moves of the central bank are taken for granted, Federal Reserve Chairman Jerome Powell should soften his words to avoid provoking a volatile reaction from traders.
Investors expect the Fed to direct its remarks towards balance sheet, patience and dependence on the data.
US-China trade talks could be a source of volatility
Since the Fed has been telegraphing its outlook for some time, trade negotiations will be a source of volatility for gold traders. This is because no one is certain of the outcome, even if there is optimism before the meeting.
The meetings should begin with a ray of optimism after US Treasury Secretary Steven Mnuchin said that if China offered enough trade concessions to President Trump, there was a chance for the administration eliminates all tariffs.
"Everything is on the table," Mnuchin said early Tuesday during an interview on Fox Business Network.
Two-day meetings are becoming increasingly important as they may be the last before the deadline of March 1 to conclude the agreement. President Trump and Chinese Xi Jinping have given their representatives until March 1 to develop an agreement on the "structural changes" of the Chinese economic model. In case of failure, Trump promised to raise the tariff rate on Chinese imports by $ 200 billion, from 10% to 25%.
Provide
The sharp rise in the gold medal since Friday leads us to believe that we could look for a situation "buy the rumor, sell the fact". In other words, as the market seems to take the Fed's prices into account, gold prices may break once announced decisions and Powell closes his press conference.
The key to the move will be Powell. He must soften his words in order to avoid triggering a volatile reaction on the financial markets. Gold could weaken if Powell appears too aggressive. Especially if his comments are strongly lowering stock prices while increasing the demand for US dollar refuge.
Any dovish speech that lowers interest rates and makes the dollar a less attractive badet will probably be favorable to the price of gold.
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