What’s Next For Gold Prices As Fed Eyes Biggest Rate Hike In 40 Years?
“Mammoth” Rate Hikes Around the World
There is no denying that Central banks across the world have fallen “way behind the curve” in tackling inflation and now find themselves in a high-stakes race – frantically trying to raise rates too fast, too late.
The most eagerly awaited four days of central bank rate hikes – nicknamed “The Rate Hike Extravaganza” – got off to a blazing start on Tuesday with Sweden’s Riksbank stepping up the game with a mammoth 100 basis point rate hike.
That’s the Riksbank’s biggest and boldest interest rate increase in three decades – which now sets a benchmark for other global monetary policy makers to follow – in what is shaping up to be a blockbuster few days for central bank rate hikes round the world.
Looking ahead, the trader’ attention has now shifted to the outcome of the Federal Reserve’s two-day monetary policy meeting on Wednesday – with yet another “mammoth” rate hike likely on the cards.
With inflation showing no signs of slowing down and likely to remain stubbornly entrenched for the foreseeable future – the Fed may have no other option, but to resort to their biggest interest rate hike in more than 40 years.
The Federal Open Market Committee has already raised interest rates by a whopping 225 basis points since March – its most aggressive monetary tightening cycle since 1981.
And so far, those efforts have hardly made a dent on inflation.
Expectations are now running high, that the Fed could be on the cusp of delivering an historic 100 basis-point rate hike on Wednesday.
Elsewhere this week, the Bank of England will take centre stage when it meets on Thursday.
With Goldman Sachs predicting UK inflation to hit 23% next year – traders are rapidly dialling up rate-hike wagers and boosting odds that the Bank of England will deliver two outsized increases by the end of the year.
Traders are pricing in 250 basis points of hikes over the next three Bank of England policy meetings, implying the central bank will raise rates by a whopping 100 basis-points at two of those meetings. The first such move could come as early as this week.
Extraordinary times create extraordinary opportunities and right now, this market is a traders dream – packed with unlimited money-making opportunities to capitalize on the short-term macro-driven volatility!
Gold Price Forecast Video for September 21, 2022
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