Gold is unchanged in the Wednesday session. In North American trade, the spot price for one ounce of gold is $1311.64, up 0.01% on the day. On the release front, investors are awaiting the conclusion of the Federal Reserve monthly meeting. With the Fed expected to remain on the sidelines, investors will be focusing on the rate statement, which is expected to be dovish in tone. The ADP nonfarm employment change fell to 213 thousand, but still beat the estimate of 180 thousand. On Thursday, the U.S. publishes Employment Cost Index and unemployment claims.
Gold is sensitive to interest rate moves, so traders should treat the Federal Reserve rate statement as a market-mover. The Fed was aggressive in 2018, raising rates by a quarter-point on four occasions. With a nasty trade war dampening global economic growth, it is clear that the Fed will ease up on monetary policy this year. But, by how much? There are a various answers, depending on who you ask. The markets are not expecting any increases this year, while the Federal Reserve continues to stick with a forecast of two hikes. The Congressional Budget Office has also weighed in, saying that it expects further rate increases this year. Investors will be combing through the rate statement, looking for clues as to the timing of the next rate hike.
Will the gold rally continue? The metal has sparkled, jumping 7.5% in Q4 adding another 2.2% in January. The metal is at 8-month highs, benefitting from geopolitical hotspots such as the U.S-China trade war, Brexit, and a more dovish Federal Reserve. Investors remain cautious, and safe-haven gold has been an attractive alternative to the recent turmoil in the equity markets.
