Last Five Rate Hikes Has Been A Buying Opportunity Gold Investors - Saxo Bank
(Kitco News) - If history is any guide, next week could signal a significant buying opportunity for gold investors as long as prices hold critical support above $1,285 an ounce, according to one analyst.
“The five rate hikes seen so far in this current cycle all resulted in the same behavior with gold selling off ahead only to rally strongly once the announcement was made,” Ole Hansen, head of commodity strategy at Saxo Bank in a note Tuesday. “The last couple of weeks ahead US rate hikes have proven in the past to be a good buying opportunity.”
Hansen added that he remains a long-term gold bull as long as prices stay above support at $1.285.
While the Federal Reserve is widely expected to raise interest rates next week by 25-basis points, Hansen said that the key for the gold market will be the central bank’s forward guidance.
In its previous economic projections, the central bank indicated that it projected three interest rate three hikes this year. However, in the last few weeks, expectations have increased for more forceful action. Hansen noted that markets are pricing in a 26% chance of four rate hikes this year.
However, Hansen explained that the economic data and the growing threat of a global trade war don’t support aggressive action from the Federal Reserve, which should be positive for gold prices.
Most recently, inflation numbers, released Tuesday, support the view that the Federal Reserve will be reluctant to raise interest rates four times this year, according to some economists.
Hansen’s comments come as gold prices manage to hold near session highs, following an in-line reading in January’s Consumer Price Index and rising geopolitical worries after President Donald Trump announced that he fired Secretary of State Rex Tillerson and replacing him with CIA Director Mike Pompeo.April Gold futures last traded at $1,328 an ounce, up 0.55% on the day.