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US Federal Reserve policy decision to influence gold prices

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Analysis by Golden FX Link Capital business manager Long Samnang.

US Federal Reserve policy decision to influence gold prices

Gold price has been on a downward trend since last Thursday – falling from a high of $1,822.77 per ounce to an opening price of $1,818.21 on Tuesday.

Investing.com. reported that the market of the yellow metal continued to be under pressure as the dollar strengthened and US Treasury yields rose.

In Asian markets, gold futures on Tuesday fell by 0.07 per cent, setting to around $1,815.

“Investors now await the US Federal Reserve’s policy decision due to be handed down on January 26. The central bank has already indicated that it could hike interest rates in March 2022 to curb high inflation.

“In Asia Pacific, the Bank of Japan kept its interest rate unchanged at – 0.10 per cent as it handed down its policy decision earlier in the day.

“Elsewhere in the region, the People’s Bank of China (PBOC) triggered expectations of further monetary easing after it lowered the rate on its one-year policy loans by 10 basis points to 2.85 per cent on Monday. It also cut the rate on the seven-day reverse repurchase agreements to 2.1 per cent from 2.2 per cent.

“The PBOC moves are a marked contrast with the series of interest-rate hikes widely expected from the Fed within 2022,” reported Investing.com.

The price of gold in early January moved between $1,831.61 and $1,782.46, while last week’s price was between $1,828 and $1,790 – indicating that the odds of gold are running in sideways direction.

The market might be in favour that the new direction of gold seems to be waiting for the Fed to decide whether to raise, lower or keep interest rates for the US currency.

Golden FX Link Capital business manager Long Samnang said: “Gold prices are likely to fall before the central bank’s decision and continue to rise after the decision as the next US interest rates change could only help in the short term, meaning that it is not yet possible to completely reduce the rising inflation rate.”

Therefore, for this week’s trading recommendation, investors can consider selling gold before the US Federal Reserve’s decision of $1,815, setting a take-profit function at $1,800 and a stop-loss at $1,828. For an uptrend, investors can wait to buy after the central bank’s decision.

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