Is Fed making a mistake? Big market risk ahead as gold looks to $1,900

11.22.21 - Is Fed Making a Mistake? Gold Eyes $1,900

Gold last traded at $1,849 an ounce. Silver at $24.73 an ounce.

NEWS SUMMARY: Precious metal prices dipped Monday on profit-taking and a firmer dollar. U.S. stocks rose after President Joe Biden picked Jerome Powell to continue to lead the Federal Reserve.

KITCO--"According to analysts, with all eyes on the U.S. President Joe Biden's Federal Reserve Chair pick, gold is waiting for its next catalyst to take it to $1,900 an ounce, with markets eyeing year-end volatility....

One of the main events the market is watching very closely is Biden's Fed Chair pick, which could be announced as soon as this weekend. According to PredictIt.org, the current Fed Chair Jerome Powell is leading the race, with Federal Reserve Governor Lael Brainard in the second top spot.

'Looking to next week, we are going to get Biden's decision. Two months ago, Powell was the likely choice. But we got the trading scandal among Fed members and progressives got upset with how Powell handled the regulatory side,' OANDA senior market analyst Edward Moya told Kitco News.

'Now, it seems that Powell's renomination might not be a foregone confusion. If we do get a surprise and Brainard becomes the next Fed Chair, it will have a dramatic shift in short-term yields. That's a big risk ahead. Key factor what happens with yields early next week.'

If Biden were to choose Brainard, gold would climb higher as the initial reaction would see those Fed rate hike expectations pushed back even further, Moya explained. However, if Powell is renominated, it doesn't necessarily mean gold would sell off dramatically. 'Risk is still to the upside,' he said.

Choosing Brainard will represent uncertainty for the markets, said Pepperstone's head of research Chris Weston.

'As the well-used term goes, markets hate uncertainty - and a Brainard appointment, at a time of impending monetary policy change, represents a small rise in uncertainty that many in the market could do without - well, except for those who like volatility which is most short-term traders,' Weston said....

As 2021 wraps up, traders will shift their attention away from rate hikes and focus more on growth. 'The Fed could be making a mistake in removing this monetary accommodation. That's a big risk. Leading up to January, the inflation report will be a big one. Gold should see strong support here,' Moya stated.

Over the next month, gold is bound to make a move to $1,900 an ounce as investors come back to bullion for inflation hedges amid a flight to safety with some additional concerns coming from Europe's COVID flare-up and the dovish European Central Bank."