The cost of gold pares the progress following the upgrade to the US Consumer Price Index (CPI) as the 10-Year US Treasury yield rebounds back from a fresh monthly low (1.43percent ), along with the Federal Reserve interest rate decision is very likely to influence the near-term prognosis for bullion as the central bank is slated to update the overview of Economic Projections (SEP).
Fundamental Forecast for Gold: Neutral
The price of gold may face range bound conditions ahead of the Fed rate decision since the central bank appears to be on track to keep the current path for fiscal policy, and it remains to be seen if the Federal Open Market Committee (FOMC) will adjust the forward guidance for fiscal policy as the central bank for a transitory increase in inflation.
Some of the same from the FOMC may prop up gold prices as the central bank plans to"raise its holdings of Treasury securities by at least $80 billion each month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress had been made," and the fresh projections from Chairman Jerome Powell and Co. may haul longer-dated US yields if the rate of interest dot-plot remains mostly unchanged from the March meeting.
At precisely the same time, another upward revision at the SEP may drag the price of gold as it boosts speculation to get a looming change in fiscal policy, and a growing number of Fed officials may alter their tone within the forthcoming months as"several participants indicated that if the market continued to make rapid progress toward the Committee's aims, it might be appropriate at some stage in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases."
With that said, new projections from Fed officials could drag on gold costs if the central bank indicates a higher willingness to switch gears, but more of the same in Chairman Powell and Co. will keep the price of bullion afloat since the FOMC relies on its emergency steps to achieve its policy targets.