Could awaited rate decisions impact gold price?

Gold is trading at $1945.45 at the time of writing, it is down by 0.60% at the time of writing as the stage is set for the major central banks in the world, particularly the Fed in the United States and the ECB in Europe.

Economists and strategists point out how the Fed meeting could impact gold price. No matter what decision is taken regarding interest rates, some market participants as well as investors will be caught wrong-footed and will revise their view, which in turn means that Gold price could be in for a volatile session.

Economists believe that the Fed has concluded its rate hike cycle, this is why some traders see more of an upside risk for gold as far as its initial response to this week’s interest rate decision is concerned.

Nonetheless, it is perfectly possible that the Fed will not yet clearly signal an end to the rate hikes but will leave itself the option of further tightening monetary policy for the time being.

Depending on how widely the Fed leaves the door open to future rate hikes, the price-positive effect of any decision not to raise interest rates just now could evaporate very quickly.

In March, only 7 of the 18 FOMC members regarded higher interest rates than the current level as appropriate. If this number rises significantly, the market is likely to bet increasingly on a rate hike in July. In this case, XAU/USD could even end up trading lower than it was before the meeting.