2023-07-05 10:13:00
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Investing.com – Markets are awaiting the disclosure of the details of the meeting held on June 13-14, amid increasing expectations by nearly 90% on the possibility of a hike in the next meeting, which will greatly affect the movement of markets in general, and gold and the dollar in particular.
The minutes provide the reasons that prompted the unchanged, following 10 increases that it started in March 2022, to settle at a range of 5-5.25 percent.
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The minutes also include the Fed’s expectations for the US economy for the coming period, especially inflation, the labor market, and gross domestic product growth, which draws a map of the financial markets for the remainder of the year.
And it does not seem that the US Federal Reserve has ended the phase of monetary tightening, as it confirmed that it can raise interest rates twice, by a total of 50 basis points, for the remaining four meetings during 2023.
Bloomberg said in a report published today, Wednesday, that most central banks will continue the monetary tightening campaign until the end of the first half of 2024, which means more pressure on economic growth.
And she stated that while China eases interest rates and lending conditions, the rest of the markets from India to South Africa, all the way to Europe and the United States, are trying to curb inflation by tightening the economy.
Central banks raise interest rates until the cost of lending becomes higher, and thus the demand for borrowing declines.
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Record scenarios and their implications for gold
The first scenario is the presence of a tightening tone hinting at a new positive rate hike and that the Fed will not stop at this point, and this scenario will provide support for the index and may head towards achieving strong gains, which will negatively affect gold and may push it to fall below the $1900 level an ounce.
While the second scenario is represented by a calm tone indicating the possibility of stopping once more in the next meeting, as happened in the previous meeting, in order to evaluate the effects of the previous interest increases. As such, the dollar may decline, and then gold will jump, because this scenario will make the Fed more cautious with regard to tightening monetary policy during the coming period, which provides support for assets that benefit from the decline in the dollar, such as gold, which may shoot above the $1950 level an ounce in the coming hours. If this scenario is achieved.
As for the third scenario, it indicates that interest cuts will be made sooner than expected, as the markets expect the process of reducing interest rates to start during the first half of next year. However, if a rate cut might be hinted at this year, that would provide massive support for gold once morest the dollar. However, this scenario remains somewhat unlikely, but not impossible, as it depends on the data as the Fed members pointed out, and therefore if inflation falls at a faster pace, the Fed’s policy may shift closer than the markets think.
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