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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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Gold Struggles Ahead of Federal Reserve Rate Hike

XAUUSD had been rejected at the $1,650 level and is under pressure ahead of the latest Federal Reserve interest rate meeting.

The US central bank is widely expected to hike interest rates again by 75 bps at their meeting on Wednesday. Still, stock markets are rallying on the expectation that the FOMC policy setters will hold back on any further aggressive policy action after the end of the year. 

GOLD – Weekly Chart

gold weekly chart october 2022

Gold prices were previously looking at the $1,700 level for critical support. Still, after a recent rally, the precious metal has slumped again. The gold market obviously doesn’t trust the stock market rally or vice versa.

The Federal Reserve has been under pressure from global central banks and finance ministers recently as the soaring dollar added to inflation in those countries.

The Fed may stand still in December to appease the global economy, but it may not mean the end of inflation.

Jake Jolly, a senior strategist at BNY Mellon, said: 

“What’s going to be most critical is how much Powell tells us about December. If Chair Powell is relatively quiet and doesn’t want to discuss his thinking, that could be hawkish. That means it will remain a very data-dependent decision. Markets like certainty; they don’t like ‘wait and see”.

There was also criticism closer to home, with US Senate Banking Committee Sherrod Brown saying: 

“It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment. We must avoid having our short-term advances and strong labour market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers.”

Markets are looking for a huge sigh of relief from the Federal Reserve. Any move on Wednesday and beyond may be temporary in the bigger picture. 

The price of gold looks at support below, but that only appears at the $1,550 level. Traders should be on guard for a Jerome Powell statement that may take the steam out of the recent stock rally and push gold higher, but should expect volatility.

Last Updated: 01/11/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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