Gold price retreats after hitting a two-week high at $1937.35 as investors remain on the sidelines ahead of the US Federal Reserve monetary policy dec
at the current 5.25%-5.50% range and to keep them higher for longer, at least until July 2024, as drawn by the Fed money market futures.
Even though the latest round of data showed that inflation has registered back-to-back upticks, the US central bank is set to skip a rate hike in September. According to the CME FedWatch Tool, odds for the November and December meeting had been lowered, suggesting that traders are not expecting additional rate hikes toward the end of 2023.
Although the Fed’s decision is important, market participants would be focused on the ‘dot plots’ to review the US central bank interest rate path. According to the latest Summary of Economic Projections , the Fed’s median estimates rates to peak at 5.6%. A confirmation could catch off guard interest rate traders, which expect rates to be capped at 5.50%.
In the meantime, the US Dollar Index remains firm at around 105.14, gains 0.06%, underpinned by high US Treasury bond yields. The US 10-year Treasury note yields 4.367%, its highest level in 16 years, a headwind forMeanwhile, Gold traders must also be aware of US Real yields, which could be followed using TIPS as a proxy. When the US 10-year TIPS coupon rises, XAU/USD’s price falls, as shown by the following chart, depicting the inverse correlation between the assets.
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