Gold vs the Fed - What to watch this week September 18, 2022
(mining.com) Jerome Powell takes center-stage for commodities in the coming days, with the Federal Reserve chief set to unleash another large rate hike that could pile more pressure on energy, metals and crops.
The fear is that stronger anti-inflation medicine from the US central bank will not just squeeze demand, but add to a dollar surge that’s battering commodities. Ahead of Powell’s big unveil on Wednesday, markets have been jittery: gold sank to a two-year low, crude notched a third weekly fall, and metals are on retreat again.
“A chunky rate hike is now largely priced into markets, but we think it could still keep a lid on prices next week,” analysts at Capital Economics wrote in a note.
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Gold versus Fed
Pre-Fed tensions are most obvious in the bullion market. The looming rate decision — together with the bank’s language around inflation and future hikes — will drive the next moves for the precious metal after a month of steady declines in the face of a supercharged greenback. The Fed is expected to raise rates by at least 75 basis points, but a bigger increase could unleash even more volatility across currency markets.
Funds are already fleeing gold. Hedge funds and money managers have turned net bearish on the precious metal. Some traders reckon there’s worse to come for gold until Fed language on inflation moderates, although others point to residual support for prices from heightened geopolitical and economic risks. The commitment of bullion’s remaining longs is set to be tested.
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Colorado Confab
Gold mining executives, investors, bankers and analysts are converging at the annual Denver Gold Forum in Colorado Springs, Colorado starting this weekend. The 34th annual gathering of the world’s oldest and largest event of the precious metals sector arrives at an intriguing time for the industry — and not just because of the crucial Fed decision that should come as the forum wraps up its final day.
Who might be the next takeover target may also be discussed at Denver Gold. There have been $13.5 billion in gold deals announced this year, with the largest being Gold Fields Ltd.’s $7 billion all-stock offer for Yamana Gold Inc. announced in May.
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