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22.03.2023 11:49 PM
Will gold and other commodities resume rising on the back of the Fed's "soft" rate decision?

After gold started to rally exactly two weeks ago, it entered a bearish correction this Monday and Tuesday, but then it started to rise again, albeit a moderate one.

Investors were anxiously awaiting the outcome of the US central bank meeting, and here investors were wondering whether the prices for the yellow metal and other commodities will rise again.

Recall that earlier this month, gold prices increased due to the banking crisis in the United States, which pushed demand for it due to fears that the US financial system could falter, causing a domino effect, expressed in bank failures, not only in America, but in other parts of the world. Then gold continued to rise on the wave of measures to stop the banking crisis, which, in turn, caused the dollar to weaken and, as a result, raised the prices for the yellow metal and other commodity assets.

And now, there is a high probability that gold prices will rise again after the Federal Reserve meeting.

Are there any objective reasons for the resumption of growth in the price of gold?

We believe that there is. If the Fed raises the rate by 0.25% or leaves it unchanged, we expect gold prices to rise again, since the Fed's decision will cause the dollar to weaken against major currencies in the forex market. If the central bank decides to reduce the rate by 0.25%, as many believe, this will fuel a strong rally in the stock market, a fall in the dollar in the forex market and an increase in demand for gold.

Prices of industrial goods and oil could also receive support. In spite of the fact that these commodities and raw materials assets are influenced by some other factors than gold, the possible noticeable decrease of the dollar exchange rate will just technically lead to a local growth of their prices.

Forecast

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XAUUSD

The price of gold is above the 1931.30 level. The negative outcome of the Fed meeting may put pressure on the dollar and thereby, support gold prices. Keeping the price above this level could lead to growth to 2000.00 in the wake of optimism on the markets.

WTI

US crude oil is below 69.70. Rising above this level may lead to growth to 73.00. The general reason for such dynamics may be the market's positive reaction to the outcome of the Fed meeting.

Pati Gani,
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