Gold was able to overcome a strong dollar

Today gold futures had moderate gains of $4.50. Gold futures basis most active April contract opened at $2159.90, traded to a low of $2149.20, and is currently trading in Australia up an additional $1.90, and when added to the $4.50 gain in New York is fixed at $2165.80.

Market participants are acutely aware of the upcoming FOMC meeting and how Federal Reserve officials will factor in the recent inflation report. Because the report showed an uptick in inflation, investors will be concerned as to whether or not that will change the amount of rate cuts that the Fed will initiate this year. According to the last dot plot which was released at the December FOMC meeting it is likely that the Fed will cut rates by three quarters of a percent this year.

The Federal Open Market Committee will hold its today meeting which begins tomorrow and conclude on Wednesday. Currently market participants are under the assumption that the Fed will not move rates this month. According to the CME’s FedWatch tool there is a 99% probability that the Federal Reserve will leave its benchmark interest rate at its current level of between 5 ¼% and 5 ½%.

MT newswires reported that the PVM oil brokers noted on their website that, "The world stands on the cusp of a new era of interest rate easing, and even though the great and the good of the central bank world procrastinate in ever-decreasing circles, the markets at least believe that the barriers obstructing a loosening of fiscal grip on the monies of the globe are coming to an end,"

All in all, considering last week’s inflation reports indicating an uptick in inflation and recent dollar strength gold has been resilient strong and forming a base below the all-time record highs that were achieved two weeks ago.

All things being equal if the Federal Reserve does not have a major change in its SEP (Summary of Economic Projections) in regards to the next dot plot, market participants have largely factored in the hot inflationary reports from last week and we would expect gold to continue to be resilient and move to higher pricing.

Wishing you as always good trading,