Gold demand surges ahead of the expected FED hike

Gold Demand Surges Ahead of The Expected FED Hike

Ahead of the expected FED hike, gold demand surges as the US economy slows down. In November 2022, the price of gold rose significantly due to the FED's dovish signals, but it declined in February 2023 as the economy rebounded. Currently, the demand for gold is increasing, with the FED preparing to deliver a 25bps hike amidst the slowing economy.

Banking Fears Lead to a Surge in Gold and JPY

Following a few weeks of trading around $2,000, gold experienced a resurgence as banking fears returned. The shares of some banks fell by almost 30%, leading to safe havens like gold and JPY experiencing a rise. 

Lower-Than-Anticipated JOLTS Data Pushes USD Lower

The USD experienced a drop after lower-than-anticipated JOLTS data was released. While the number marked a two-year low, it was still higher than pre-COVID levels. 

FOMC Meeting Expected to Raise Rates by 0.25%

The FOMC meeting is set to raise rates by 0.25% to a range of 5.00% to 5.25%. During the previous meeting, the Fed dot plot predicted a terminal rate of 5.11%. 

Gold Breaks Above the 100 SMA on the H4 Chart

On the H4 chart, gold was trading between the 100 SMA and the 200 SMA for two weeks before breaking above the former at $2020. This breakout could lead to record highs if the expected FED hike is dovish. Traders are looking for a retrace lower to open a buy gold signal.

Gold's Impact on the Forex Market

The fluctuations in gold prices have a significant impact on the forex market. As the value of gold increases, traders may opt for gold-backed currencies like the Swiss Franc (CHF) and Japanese Yen (JPY). Additionally, higher gold prices are usually accompanied by a weaker US dollar, which can lead to currency pairs like USD/JPY experiencing a decline. As the FOMC meeting takes place, forex traders will be watching the gold prices closely, analyzing the impact on currency pairs and adjusting their strategies accordingly.

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