Gold traders holding their breath ahead of FOMC Gold traders holding their breath ahead of FOMC Gold traders holding their breath ahead of FOMC

Gold traders holding their breath ahead of FOMC

Ole Hansen

Head of Commodity Strategy

Summary:  Gold has spent most of December trading rangebound with an underlying tone of weakness since November 22, after surprisingly hawkish Powell and Brainard acceptance speeches, raised the prospect for a much sooner than expected lift-off in US rates. Today's FOMC should give us some answers and with inflation running red hot, expectations for a very hawkish outcome has created a sense of unease across markets

Gold has spent most of December trading rangebound, with the 200-day moving average around $1793 offering strong resistance. The yellow metal has been on the defensive, with an underlying tone of weakness since November 22, after surprisingly hawkish Powell and Brainard acceptance speeches helped trigger a sharp sell-off.

Source: Saxo Group

The combination of surging inflation, recently hitting 6.8%, the highest since the 1980’s, and both FOMC members having been read the riot act by the White House, has driven a clear change in focus at the Fed from job creation to combatting inflation. The encouragement from the White House being driven by Biden’s slump in the polls as millions of Americans are getting hurt by rapid rising prices of everything from fuel to food and housing.

There is no doubt the FOMC will deliver a hawkish outcome tonight, but how the market will react is not straight forward. In his latest update titled “The Fed expectations conundrum”, our Head of FX Strategy, John Hardy discussed three potential scenarios, and how the market may react to each of them.

Being the most interest rate and dollar sensitive of all commodities, gold may see a strong reaction to the outcome, and given the price behavior in the run up to the announcement, traders have moved to the side of caution. Driven by worries that the FOMC may opt for what John Hardy calls the hawkish case, where the Fed delivers a doubling of the speed of tapering by $30 billion or faster. Doing that would leave the door wide open for the Fed to move forward the lift-off date to March from current expectations for June.

Ultimately gold’s direction will, as mentioned, be determined by the response in long-end yields and the dollar. The outlook for 2022 remains clouded with most of the bearish gold forecasts being driven by expectations for sharply higher real yields. Real yields have throughout the past few years shown a high degree of inverse correlation with gold, and it’s the risk of a hawkish Fed driving yields higher that currently worries the market.

Source: Saxo Group

However, with three rate hikes priced in and with gold trading at levels which look around 0.25% too cheap relative to 10-year real yields, the downside risk should be limited unless the Fed turns up the rhetoric and signals a more aggressive pace of rate hikes.

It is also worth keeping in mind that rising interest rates will likely increase stock market risks with many non-profit high growth stocks suffering a potential revaluation. In addition, concerns about persistent government and private debt levels, increased central bank buying and the dollar rolling over following months of strength, are all potential drivers that could offset the negative impact of rising bond yields.

At this point gold remains on the defensive and only a break above the mentioned 200-day moving average can change that. So, barring any sudden change gold will be heading for its worst annual performance in dollar terms since 2013.

Source: Saxo Group

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.