What’s Next For Gold Prices As Fed Prepares To Skip September Rate Hike?

Phil Carr
Published: Sep 20, 2023, 14:32 GMT+00:00

The most highly anticipated FOMC Meeting of 2023 and quite possibly the most pivotal monetary policy decision in Jerome Powell’s career is finally here.

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Global Interest Rates Unveiled in 36-Hour Marathon

As the U.S central bank faces its biggest dilemma ever on whether to skip, pause or hike interest rates.

Over the next 36-hours, half of the world’s G20 nations will announce interest rate decisions – starting with the Federal Reserve on Wednesday and ending with the Bank of Japan on Friday.

This 36-hour sequence of global monetary policy setting will ultimately determine the tone for the rest of the year as central banks grapple with the mantra of “higher for longer” and take account of the inflationary effect of booming Commodity prices.

Federal Reserve’s Dilemma: To Skip, Pause, or Hike Interest Rates Amidst Inflationary Pressures

First out of the gate and taking front and centre stage will undoubtedly be the Federal Reserve.

Faced with a fresh wave of inflationary pressures from skyrocketing Oil prices, an autoworkers strike to a full U.S government shutdown at the end of the month – expectations are running high that the Federal Reserve is likely to hold its benchmark interest rate at a 22-year high.

The Federal Open Market Committee is expected to skip an interest rate increase this month and leave rates unchanged at the current range of 5.25% to 5.5% when it concludes its two-day meeting.

This move would mark the clearest sign yet that officials think the risks confronting the U.S economy have become much more complex.

A year ago, we were in a situation that was in one dimension completely clear. It was obvious that they needed to move the policy rate up and they needed to do it aggressively. Today we are in a different situation where it is a much closer call between whether they have done enough and going one rate hike too far.

There’s no doubt that surging Oil prices will play a big role in the Fed’s interest rate decision and put pressure on policymakers to proceed with caution.

Crude Oil hit another 2023 record high this week as concerns about a tightening market pushed Brent benchmark prices within striking distance of $100 a barrel.

History shows that surging energy costs usually play a role in tipping the U.S into recession. When Oil prices doubled in September 1990, February 2000 and June 2008, the economy was either in a recession already or on the verge of entering one.

Oil price spikes matter much more than modestly rising prices. Household income is fairly fixed in the near term, so spiking Oil or Gasoline prices force consumers to quickly cut back on other spending categories. The greater the increase in energy prices, the more likely a recession eventually unfolds.

The big question now is will the Fed skip, pause or hike interest rates again on Wednesday?

As traders know – regardless of the outcome, every rate decision has enormous potential to move the markets significantly, presenting massive opportunities to capitalize on!

Gold Price Forecast

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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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