Continuous talks between Ukraine and Russia brought revert move on yellow safe haven asset, when it plunged 3.70% from week’s open at 1978$ per ounce to actual low at 1904.7$. Price move is affected by possible peace talks and compromises about actual situation in Eastern Europe.
30 minutes chart of GC (Gold futures), Source: tradingview.com
On Wednesday this week the Fed rate decision with economic projections is expected. It will be presented during the press conference at 19:30 GMT+1. We have informed about this topic earlier this month here and here. Consensus for interest rate is to hike by 25bp to 50bp. In the case an actual decision will be higher than expected, it would negatively affect the price of gold.
The question is: Why can it have a negative effect? Because gold has no interest and higher interest rate by central bank rises rates in different financial products with interest. Simply, investors are more likely to choose product with higher rate than lower, because it brings more money.
Read more: DAX surges in optimistic start of the week
On the other hand, in the case that number will be same as consensus, the price move should be calmer or go up, because markets have already counted with that consensus. Or, the surprise will be delivered by lowering the interest rates. But this scenario is unlikely.
Considering all of the above, Fed´s decision is highly monitored economic fundament, and the volatility is noticeable. In addition, during the Fed press conference anything could be said and the price reaction could be irrational. It is more than adequate to not trade this session, stay out of trades and wait for bigger move to analyze next supports and levels.
More technical analysis will come after this decision.