Global Central Banks at a Crossroads

By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all

After months of ambiguity and contradictory signals, Federal Reserve Chair Jerome Powell gave bullion traders an early Christmas present on Wednesday, offering his clearest statement yet that the central bank is finished with its aggressive hiking program and will begin cutting interest rates in 2024. The Fed maintained interest rates at a 22-year high. Still, the decision coincided with new estimates from the Federal Open Market Committee signalling a 75-basis point reduction next year – a more dovish outlook for rates than in earlier projections.

Expectations for Fed rate reduction in 2024 have been building since the beginning of December, when Federal Reserve Governor Christopher Waller, one of the central bank’s most influential voices, signalled that interest rates were unlikely to rise further and may be slashed if inflation continued to decrease. Waller’s comments sent gold prices soaring to an all-time high of $2150/oz.

The European Central Bank (ECB) and the Bank of England (BoE) both refused to join the pivot party given by the Federal Reserve (FED). Both Christine Lagarde and Andrew Bailey refrained from discussing interest rate cuts, citing the risk of policy easing too soon as the inflation danger approaches. The BoE’s Bailey hinted at another rate hike, as three MPC members favoured raising rates, while the ECB announced an expedited exit from the PEPP stimulus. The contrast between the strong US economy’s dovish approach and the collapsing European economies’ hawkish stance provides the sense that global Central banks are at a crossroads.

From the technical perspective, Gold prices have taken support of 38.2% Fibonacci retracement at the uptrend line, from Rs 56000 to Rs 64500. Prices are likely to face strong resistance around Rs 63000 before moving higher. In fact, for the next 15 days, prices are expected to trade from Rs 61000 to Rs 63000.

Indian Gold Daily chart

 

Silver prices a string support an uptrend and then prices rebounded this week. Prices are expected to trade from Rs 73000 to Rs 76000 for the next 15 days.

Indian Silver Daily chart

 

 

 

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