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Gold Is Not Watching Fed Decision, It Is Focusing On Powell's Presser - TD Securities

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Gold Is Not Watching Fed Decision, It Is Focusing On Powell’s Presser — TD Securities

(Kitco News) - The Federal Reserve rate decision will be a non-event for the precious metals market this Wednesday while the press conference following the announcement will take center stage, TD Securities said in its latest Commodities Weekly update.

The U.S. central bank will be making its first rate announcement of the year this Wednesday and markets know exactly what to expect, with the CME FedWatch Tool showing expectations of a pause in hikes at 100% during this meeting.

“The Fed has the potential to set the overall tone for commodities, as a dovish tilt could go a long way towards removing a considerable impediment to emerging market and speculative demand for commodities,” strategists with TD Securities wrote. “In this week's FOMC meeting, the interest rate decision will be a snooze-fest, but the statement and press conference will likely be noteworthy.”

The market has also been preoccupied with reports of an early end to the Fed's balance sheet runoff, which has helped gold rally this past week, the Canadian bank said.

“Late in the week, a WSJ story musing on the prospects of an early end to the Fed's balance sheet runoff also saw most assets rally, with gold and precious metals strengthening sharply in response,” the strategists said. “Considering the market's recently found optimism with respect to an early-end to the Fed's balance sheet runoff, we suspect that the bar is high for a positive reaction for risk assets.”

Other drivers that could impact gold prices this week include trade talks and Brexit uncertainty, TD’s update added.

“Global markets will face several key events in the few sessions ahead that could potentially be crucial towards price discovery … Continued Brexit drama, economic data and an eventful week for U.S. earnings season will be the main focuses in this busy week,” TD Securities said. “At the same time, we anticipate that statements from the higher-level trade meetings could also provide a major catalyst for commodity prices.”

At the time of writing, February Comex gold futures traded at $1,301.80, down 0.10% on the day, after closing above $1,300 an ounce level and hitting a seven-month high of $1,303.70 on Monday. 

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