Market players await Federal Reserve forecast

According to the Federal Reserve’s website, “Forward guidance is a tool central banks use to communicate to the public about the likely future direction of monetary policy. When central banks provide forward-looking guidance, individuals and businesses will use this information to make spending and investment decisions. Thus, forward-looking directions on future policy can influence financial and economic conditions today. “

The FOMC began issuing forward-looking guidance in its post-meeting statements in the early 2000s. Since then, it has been a central element for businesses, as well as investors in general, in determining any changes in the Fed’s monetary policy from one FOMC meeting to another. While the Federal Reserve is eagerly expected to leave its federal funds rate between 0% and ¼% intact and continue its monetary policy of purchasing mortgage-backed securities and US debt by allocating $ 120 billion by month, the exact timing in which they will start implementing the gradual reduction in quantitative easing and low interest rates remains uncertain.

At 4:15 p.m. EST based on gold futures, the most active August 2021 Comex contract is currently trading down $ 4.60 and pegged at $ 1,797.20. It seems that gold investors and traders are hoping for the best but preparing for the worst, which has recently put the price of gold on the defensive. This is the first time since July 6, 2021 that gold futures have effectively closed below the key psychological level of $ 1,800 an ounce.

In an interview with Neils Christensen, editor of Kitco News, Rob Haworth, senior investment strategist at US Bank Wealth Management, said that “in the near term he expects gold prices to stay the same. on the defensive as investors on the ongoing economic recovery in the US. “During the interview, Rob Haworth also said:” In the near term, he expects gold prices remain on the defensive as investors on the ongoing economic recovery in the United States. ”

However, the senior investment strategist at US Bank Wealth Management warned that “investors may have to wait until September to see how the next phase of recovery plays out. A new wave of COVID-19 virus is sweeping the United States ”Depending on how controllable the new Delta variant is and whether or not it leads to the opening of schools, the main eventuality is whether the current recovery passes or no to a longer expansion phase.

Starting tomorrow, the Federal Reserve will begin its two-day Federal Open Market Committee meeting in which Fed members are highly expected to deliberate on the most likely and viable timeframe to start unwind unprecedented purchases of $ 120 billion per month, mainly purchases of US debt. They will present the specifics of their current monetary policy by offering the public forward-looking guidance. Forward-looking guidance will be released in the press release immediately following the conclusion of this month’s FOMC meeting. This will be followed, as always, by a press conference by Federal Reserve Chairman Jerome Powell.

On a technical basis, our studies indicate that there is still a strong level of support at the 100-day moving average for gold which is currently pegged at $ 1,745.50, as well as the 50% retracement of the last major rally. which began in late March 2021, when gold was trading from a low of $ 1,674 to highs reached on June 1, 2021, when gold was trading up to $ 1,919 per ounce.

Currently, we are seeing major resistance at the 38.2% Fibonacci retracement using the same data set mentioned above, which is currently pegged at $ 1,825.40.

Wishing you, as always, good transactions,