The Fed is widely expected to hike interest rates by 25 basis points at the conclusion of a two-day meeting on Wednesday, although markets are expected to have already priced in the hike.
A key point of uncertainty for traders is what the central bank will signal with regard to its plans for future rate hikes. Fed Fund futures prices show that the central bank is expected to announce an extended pause in its rate hike cycle after Wednesday’s hike.
But given that U.S. inflation is still trending well above the Fed’s annual target, the bank could still potentially signal at least one more rate hike this year.
Rising interest rates bode poorly for non-yielding assets such as gold, given that they push up the opportunity cost of holding bullion. This trade battered gold through 2022, and has limited gains in the yellow metal so far this year.
The outlook for gold also remains uncertain, given that U.S. rates are likely to stay higher for longer.
