Further delays in passing another round of US fiscal stimulus may continue to weigh on gold asthe precious metal fails to exhibit the bullish trend from earlier this year and no longer trades to fresh yearly highs during every single month in 2020, but the deadlock in Congress may put pressure on the Federal Reserve to further support the US economy as “several participants suggested that additional accommodation could be required.”
However, the Federal Open Market Committee (FOMC) Minutes may spark a limited market reaction as the update to the Summary of Economic Projections (SEP) showed the longer run interest rate forecast unchanged from the June meeting, and the transcript may indicate more of the same for the next interest rate decision on November 5 as the central bank vows to “increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace.”
The wait-and-see approach may continue to sap bets for additional monetary stimulus as the Fed’s balance sheetnarrows to $7.056 trillion from $7.093 trillion in the week of September 23, and it seems as though the FOMC will rely on its current tools to support the US economy as most officials judged that “yield caps and targets would likely provide only modest benefits in the current environment.”
Nevertheless, the FOMC may stick to a dovish forward guidance as Chairman Jerome Powell insists that the central bank remains “committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible,” and key market trends may persist throughout the remainder of the year as the net-long US Dollar bias resurfaces in October.
