The gold market awaiting the publication from the Fed

One of the factors influencing the evolution of gold prices the most is the state of interest rates. Every time there is a meeting of the Federal Reserve Board, the gold market holds its breath to see what action they take. The impact of the Fed statement is felt three weeks after each meeting. 

The contents of the Federal Open Market Committee of the Federal Reserve’s meetings contain information about the state of the economy. They reflect concerns about the condition of the United States market. Now that the country’s capital has been affected by the coronavirus pandemic, the interest in the central bank’s statements is massive. 

The price of gold surpassed the barrier of $2,000 an ounce again on Tuesday. Earlier in August, the spot price reached $2,013.40 an ounce.

Gold has experienced a significant drop in price over the past week, overall. This is the result of the US dollar rebound and the relative improvement in yields on US treasuries. 

So, for now, the gold market is looking forward to the Fed release. This content could influence the factors mentioned above and allow gold to continue rising.

On Tuesday, the dollar index fell to its lowest level in recent years, at 92.11. It has stabilized in the early hours of Wednesday at 92.34. 

The yields of the US 10-year Treasury bond have dropped by 3% in the previous two days.

The US employment rate has recovered

Analysts are pessimistic about the future evolution of the dollar and bond yields. This means that investors will continue to flock to safe havens like gold. 

Since the coronavirus pandemic started spreading in the US, the Federal Reserve has kept interest rates close to zero. The Fed has allocated several trillion dollars of its balance sheet to finance distressed companies and credit markets.

During the first quarter of the year, the US economy contracted by 5%. In the second quarter, it registered the worst recession in the United States’ history, with a drop of 33%.

Despite this, the employment rate has recovered quickly in the country. In the last three months, 10 million jobs have been restored, compared to the 21 million that were lost between March and April.

The employment data at such a delicate time for the US economy is likely to be one of the few positive factors the Federal Reserve mentions in its statement.