The window to buy is wide open right now, as markets await the outcome of the Federal Reserve monetary policy meeting. Rumours are swirling that the Fed will take an even more hawkish stance and increase the speed of its rate hikes, ratcheting up from 50 points to 75.
Analysis carried out by CME’s FedWatch Tool shows that markets are certain more aggressive tactics are on the table, with a 90.5% chance that the planned 50-point hike will increase to 75 as a result of last Friday’s record-breaking inflation data.
In the very short term, this presents a very attractive opportunity to buy, with gold and other safe haven assets facing temporary headwinds in the form of a stronger dollar and rising bond yield. In trading yesterday, gold dipped by 3% making this a time to act.
Lukman Otunuga, Senior Research Analyst at FXTM says investors are acting pre-emptively and “pricing in the chance of a 75-basis point U.S. rate hike following last Friday’s smoking hot inflation figures.”
Analysts at Blue Line Futures said the longer-term picture remains incredibly positive for gold and that it will inevitably overcome this blip saying, “a time will come where inflation cools, and the Fed can take its foot off the gas. When that happens, it will be gold’s time to shine.”
Saxo Bank’s head of commodity strategy, Ole Hansen said that there is an overwhelming amount of support for gold, thanks to the continuing economic challenges, stagflation, inflation and the threat of recession. He said, “We believe that hedges in gold against the rising risk of stagflation together with traders responding to the highest level of inflation in 40 years, as well as turmoil in stocks and cryptos, are some of the reasons why gold has not fallen at the pace dictated by rising real yields.”
Don’t be fooled by this window to buy; it isn’t set to remain open for long. Don’t miss out.