Gold Prices Recover But All Eyes on FOMC

Gold prices recovered in a slow and steady manner over the last 24 hours as the dollar seemed on the backfoot all across the board. The market is preparing itself for the FOMC later in the day today and as we had mentioned in our forecast yesterday, we have been seeing the traders positioning themselves for today and hence not much can be read into the price movements in the gold market since the beginning of the week. So, after a day of weakness and a day of strength, we await the Fed in the middle of the US session for today.

Gold Prices Move Up Through 1310

The market expects the Fed to be hawkish and it hopes that the Fed would not only give out a plan for the balance sheet adjustments but also keep the door open for another rate hike in December. The incoming data from the US has been mixed over the past couple of weeks and not strong enough for the Fed to lean this way or the other but with the inflation holding steady, though below target, the Fed would not want to shut the door on the rate hike just yet. This is what the market believes and if the Fed does indeed sound hawkish during the announcement, then we could see a strong recovery in the battered dollar in the short term which could easily push the gold prices towards the support just below the $1300 region. It points to a very volatile day ahead in the markets and the traders would do well to wait for the dust to settle.

Oil prices continued to hold steady over the last 24 hours and ever since the beginning of the week, we have had signs and bouts of weakness in the prices but each time, we have seen the prices bounce back in a strong manner. This was the case yesterday as well as the prices dipped below the $50 mark for a brief while before recovering and moving higher. The oil prices seem to be having a mind of their own and they do not seem to be guided by the strength of the dollar any longer. We maintain that the oil prices are in an uptrend in the medium term.

Silver prices also recovered slightly yesterday, on the back of some strength in the gold and silver markets, on account of the weakness in the dollar. But the focus is clearly on the FOMC which will determine the short term direction.