Gold is trading quietly at the $1200 level in Wednesday’s North American session. On the release front, CPI and retail sales reports proved to be non-events, as the key consumer indicators eked out small gains in February. Later in the day, the Federal Reserve will issue a rate statement, with the markets widely expecting a rate hike for the first time in 2017. Thursday also promises to be busy, with the US releasing several major indicators, led by unemployment claims.
The markets are waiting and ready for the Federal Reserve to raise interest rates on Wednesday from 0.50% to 0.75%. A quarter-point hike is currently priced in at 93%, so it’s an open question if a rate move will affect the dollar. At the same time, the sheer magnitude of a rate move could have an impact on the markets and send gold prices lower, as the metal is sensitive to interest rate movement. With the labor market close to capacity and inflation moving higher, the Fed appears ready to press the rate trigger. Still, Fed policymakers remain concerned that President Trump has so far failed to provide any specifics on his promises to reform the tax code and increase fiscal spending. The Fed will likely hike rates on Wednesday, with an eye towards additional small hikes during the year if the economy continues its impressive performance.
