FED likely to stop hiking rates, gold price will break out?

The Fed may soon stop raising rates in response to the banking crisis and falling inflation.

>> The banking crisis will drive up gold prices even further

This week, the gold price rose to $1,987 before falling to $1.966 and finally closing at $1,968.

SJC gold bar prices in Vietnam fell to 66,9 million VND per teal from 67,3 million VND per teal.

The gold price is up 7% month on month and 9% year on year, marking the best monthly performance since July 2020 and the best quarterly result since Q2 2020.

The failure of Silicon Valley Bank three weeks ago triggered the banking crisis, which shifted markets' expectations of the Federal Reserve from more rate hikes to rate cuts.

It is unclear whether the banking sector's volatility has ended. However, all of the additional lending overseen by the Fed has yet to slow, according to Bannockburn Global Forex chief market strategist Marc Chandler.

"The banking anxiety that roiled markets this month has subsided. However, the Federal Reserve's emergency lending through the discount window and the new Bank Term Funding Program has barely slowed in the last week ($152.6 billion vs. $163.9 billion) "Chandler stated on Friday.

According to Barclays strategist Joseph Abate, the banking crisis is likely far from over, with a "second wave" of deposit outflows on the way.

"We believe the first wave of outflows is nearing its end... However, the recent turmoil over deposit safety may have awoken'sleep y' depositors and begun what we believe will be a second wave of deposit departures, with balances moving into money market funds", said Joseph Abate.

It should be noted that the US Commerce Department recently released the most recent data for. After accounting for a 0.3% MoM increase, the PCE inflation index came in at 5.0% year on year. This is half of the MoM increase from the previous month, which was 0.6%. According to the report, food prices increased by 0.2% during the month while energy prices fell by 0.4%.

>> Despite the Fed's rate hike, gold price will set a new record?

The core PCE price index increased by 0.3% in February, down from 0.6% in January, to 4.6% year on year, a fractional decrease from 4.7% year on year in January. Although today's report showed that inflation is continuing to fall, some components remain persistent, and inflation remains high. Worryingly, the rate of inflation for services continues to be high.

Movements of gold prices in this week

With the banking crisis and falling inflation, many experts predicted that the Federal Reserve would pause its monetary tightening policy at its May meeting.

According to the CME's FedWatch tool, professional traders are roughly split between expecting a 4% rate hike or a pause in interest rate hikes at the next FOMC meeting. According to the CME's probability indicator, the Federal Reserve will pause its hawkish monetary policy of raising rates at the next FOMC meeting, with a 52.2% (down from 52.9% yesterday) probability, and a 56.4% (down from 52.9% yesterday) probability that the Fed will raise rates by 0.25%.

Mr. Colin, an FX analyst, said a solid support level for gold prices in the short term would around $1,900 and $1,850, with immediate resistance at $2,000 an ounce and then $2,060-2,070. Long term, gold will surpass $2,000 as soon as the Fed lowers interest rates.