What’s Next For Gold As Sticky Inflation Favors Return To Bigger Rate Hikes?

Phil Carr
Published: Feb 22, 2023, 14:20 GMT+00:00

Gold prices are currently in wait-and-see mode as traders turn their attention to the FOMC Monetary Policy Meeting Minutes for clues on the precious metals next big move.

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Traders Await the Minutes from the Latest Fed Meeting

The major market-moving event that traders will be watching closely on Wednesday – is the release of the latest Minutes from the Fed’s January 31 – February 1 meeting.

The Minutes are expected to shed light on how many policymakers saw the case for a larger interest-rate hike at their last meeting and whether they anticipated the need to take rates higher than previously thought to tame persistently high inflation.

At the FOMC press conference on February 1, Fed Chair Jerome Powell flipped the script from “the year of inflation to the year of disinflation”.

Powell didn’t just double down on his disinflation comments – he started his whole speech by declaring that the “disinflationary cycle has begun.” In fact, he used the word “disinflation,” 13 times, which signalled to the market that the end of rate hikes was near.

But surprising strength in hiring, wages and consumer spending – is now showing evidence that the economy isn’t slowing down anything like as much as many had thought.

The Fed has now raised interest rates eight times in a row since March 2022 – by a total of 450 basis points – to a range between 4.50% and 4.75%.

Though inflation has moderated from the 40-year high of 9.1% in June, it was still far above the Fed’s target at 6.4% in January. It was just slight drop from December’s reading, suggesting price pressures remain stubbornly high and that the Fed’s campaign to crush inflation is still very much unaccomplished.

On the heels of stronger economic data and hawkish messaging from several policymakers, traders are now pricing in the possibility of the Federal Reserve extending its rate hiking campaign for longer than previously expected – taking interest rates to a peak of 6%, the highest since 2000.

The big question now is will the Fed stick with its current plan of smaller 25-basis point rate hikes or make a return back to “super-sized” rate hikes?

Right now, Gold prices are trading in a narrow range, which indicates a big move is on the horizon. The only question now, is which way.

Gold Price Forecast for February 22, 2023

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Phil Carrcontributor

Phil Carr is co-founder and the Head of Trading at The Gold & Silver Club, an international Commodities Trading, Research and Data-Intelligence firm.

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