FOMC minutes release is a key event of the day. US central bankers admitted in December that their response to the rising inflation was delayed. Pace of tapering was doubled and now QE purchases are expected to be wound down by the end of Q1 2022. However, the question is what comes next. The US labor market remains strong and tight so price growth is likely to be in Fed's focus in the coming months. Some rumours surfaced on the market that Fed members already started discussing trimming its balance sheet, which means removing liquidity from the markets. Should minutes confirm that such discussions took place at the meeting in December, risk assets, like equities, may feel the pain. Apart from the balance sheet, investors will also look for hints on rate hikes. While it looks certain that the Fed will start rising rates after winding down QE programmes, the question is whether the first rate hike will come immediately in March or later.
Quicker policy tightening in the United States is not only potentially negative for stocks but also for precious metals. Taking a look at the GOLD chart at H1 interval, we can see that precious metal has bounced off the $1,800 area, marked with the lower limit of a market geometry, this week. However, after a brief move higher, price started to trade sideways. Volatility on the gold market in recent hours has been depressed, what may suggest that investors are waiting for hints from FOMC minutes. Having said that, volatility on GOLD is expected to increase near FOMC minutes release time (7:00 pm GMT).
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Source: xStation5
