How quicker asset tapering can we see?
Today ahead of FOMC meeting minutes, the main question is the speed of asset tapering. While we know the result of the early November meeting, now the meeting minutes will give us more information about the combining votes and comments of members, which can make it more clear for us that what will be the possible reaction of FOMC members to the current data and situation in their last meeting of 2021.
One of the most important points that we have to watch is the notes about members' comments about the speed of asset purchases and when it must be ended. With fine, and acceptable development in the labor market, now Inflation is the main concern over there and indicates that the Fed needs to increase tightening policies, sooner than presently signaled.
Earlier today we had The RBNZ meeting and Governor Orr's press conference. Reserve Bank of New Zealand in this meeting hiked interest rates to 0.75% and disappointed many analysts that were waiting to see 50bp rate hikes. The RBNZ move to limit the inflationary pressures was less than expected. Also, the central bank projected 2% benchmark borrowing costs by the end of 2022. After the meeting, governor Orre told that they will give more time before another rate hike, and that comment also added more pressure on Kiwi.
And now investors and market participants are looking at other central banks including FED to see how they are going to react to the inflation concerns, which continue to remain at high levels. For FED meeting minutes, we are waiting to see more Hawkish tone from members and it will increase the market risk and pressure on stock markets, which will add the demand for Gold and US Dollar.
Gold still trading under the USD 1800 level. US 10-years bond yields increased again above 1.65% to put the Gold under pressure. Adding that, some investors were preferring Bitcoin as their inflation hedge to see less demand for Gold, However Bond Yields, still were the main market mover for Gold.
From the technical point of view, if yellow metal falls below 1788, and then 1758, can target the USD 1725 region. Inflation fundamentals still support the gold demands to increase once again above 1,800 level, however, if Wall Street shows a positive reaction for gold, with the current US dollar rate, gold can fall towards much lower levels.