Commerzbank: Gold Would Benefit If Fed Hints At ‘More Gradual Approach’

Gold could get a lift if Federal Reserve Chair Jerome Powell and his fellow policymakers are more dovish than the market might be expecting, says Commerzbank. The Federal Open Market Committee begins a two-day policy meeting Tuesday. Another rate hike of 25 basis points is expected and thus such a move would be unlikely to have any noticeable impact on the gold price, Commerzbank says. “What Fed Chair Powell says at the subsequent press conference will have far more of a bearing. Some Fed representatives had raised the prospect in recent weeks of further rate hikes, which has been pressuring gold. If Powell now indicates a more gradual approach, on the other hand – the key rate is nearing what is viewed as a neutral level, after all – the gold price is likely to rise.” Should this happen, there likely would be short covering by speculators in the futures market, the bank says. This is when traders with short, or bearish, positions start buying to exit their trades.

By Allen Sykora of Kitco News;

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