Gold remains in a tight range ahead of FOMC

Gold remains confined within a narrow trading range. There was s touch of selling pressure on Friday, but the price of gold bounced back this morning during the European session and is currently trading at $1,963.73 per ounce.

The markets have adopted a rather cautious stance in anticipation of the forthcoming U.S. consumer price index figures and the upcoming meeting of the Federal Reserve this week. The inflation data, due tomorrow, is anticipated to play a significant role in the Fed’s interest rate decision on Wednesday, as their primary objective during this round of rate hikes has been to curb inflation. Although the inflation rate currently remains below the exceptionally high levels witnessed throughout 2022, it still exceeds the Federal Reserve’s annual target of 2%

Where next for gold?

Over the past three weeks, the price of gold has been moving within a narrow trading range, fluctuating between $1,930 and $2,000 per ounce. The uncertainty surrounding the economy and monetary policies has provided little guidance for a significant price breakthrough.

Should the Federal Reserve decide to take a pause in its hiking cycle, gold stands to gain, benefiting from this potential shift. As global economic conditions continue to deteriorate this year, the demand for gold as a safe haven is expected to increase. However, the attractiveness of gold may be limited due to the likelihood of higher and sustained interest rates in the US. In comparison, returns on debt appear more appealing, which could constrain the upward potential of the precious yellow metal.

Throughout 2022, rising interest rates negatively impacted the price of gold as the Federal Reserve implemented a series of aggressive monetary tightening measures, similar to those seen during the 2008 financial crisis. However, the anticipation of a pause in such measures in 2023 has kept the outlook for gold positive thus far this year.