4-3-1, Traders Await Information on Dot Plot

As traders await the conclusion of this month’s FOMC meeting, they will listen intently to the monetary policy statement released at the conclusion tomorrow. Inasmuch as the market has factored in the almost certainty that the Federal Reserve will announce an interest rate hike of 25 basis points tomorrow (1/4%), it is the pace of rate hikes in the future that will garner the most significant attention.

In an interview with MarketWatch, Alfonso Esparza, senior currency analyst at Oanda, said that the rate hike “has already been priced in, but gold traders will be on the lookout for insights on the economic projections and Chair Jerome Powell’s news conference. A neutral to dovish speech from Chair Powell could boost gold prices, especially if it comes from more mentions of trade turmoil risks.” 

If, as the majority of analysts believe, the Fed raises rates tomorrow it will be the third incremental rate hike this year. Currently, the Fed has laid out a total of four rate hikes this year, followed by three rate hikes in 2019, and one final rate hike in 2020, according to their “dot plot” timetable.

Threading the Needle Carefully

The key to the Fed’s incremental and measured interest rate hikes is to keep economic growth at a defined pace without these rate hikes resulting in a recession. Bring in Peter Hooper, chief economist at Deutsche Bank Securities, said, “The Powell Fed can make history by engineering a soft landing from below.” 

As of 4:30 PM Eastern standard time, gold futures are currently trading fractionally higher, with the most active Comex contract currently fixed at $1,205.60 a net gain of $1.20 today. We expect market action to be reserved as we await the Fed decision which will be announced at 2 PM Eastern standard time on Wednesday.

The U.S. dollar index is also trading, in essence, unchanged, currently fixed at 93.72 after declining 0.06% today.

Although it is highly believed that the Fed will announce and initiate an interest rate hike tomorrow, and maintain the current pace of interest rate hikes as laid out by the Federal Reserve’s “dot plot”, any surprises could have a profound impact on dollar strength or weakness, as well as the future direction of gold pricing,

Wishing you as always, good trading,