Gold on the Rise As Fed Approaches Policy Decision

Earlier this week, gold futures made its second consecutive gain, extending its climb to what is now the highest price in the last seven days.  While this is certainly good news in many regards, traders are cautious and will continue to monitor how this develops in relation to recent attacks on the Saudi Arabian oil infrastructure.  This will be a crucial factor as we approach the Federal Reserve decision whether or not to raise interest rates.

Indeed, analysts are saying the modest move that gold is making right now is in direct response to attacks on Saudi oil. Furthermore, they reassure these shifts will not likely lead to near-term retaliation from Riyadh or from Washington.  Some argue that Iran was, in fact, involved with the Saudi attacks over the weekend but the Iran denies any involvement.  Unfortunately, Saudi officials said there is not enough evidence to blame Tehran indefinitely. 

All this is in mind, markets are making a timid shift to focus on central bank policy. The Federal Reserve will conclude a two-day policy meeting on Wednesday, culminating wit a new monetary policy statement.  With that, analysts expect the Fed will cut its benchmark interest rate by approximately one-quarter point. This will bring interest rates down to a range of 1.75 to 2.0 percent.  Fed Chairman Jerome Powell will also probably outline his reasons in support of holding back on initiating a full easing cycle.  And this could definitely influence the movement of trade assets, which includes gold. 

Gold prices have already climbed more than 18 percent since touching its low for the year, so far, of $1,265.85.  That was in early May; and the commodity has jumped more than $200 since then.  All in all, experts say this supports a more dovish stance from major central banks across the globe as well as the escalation of the US-China trade conflict and increasing tension in the Middle East.