Central bank governors are set to speak at the European Central Bank’s (ECB's) Sintra conference. However, gold is unlikely to break its recent trading range, strategists at TD Securities report.

Hawkish Fed regime clashes with recession fears

“Central banker headlines will hit the wire today with Fed Chair Powell set to speak on a panel at the ECB's Sintra conference, but gold markets are set to remain locked firmly in the recent trading range.”

“The yellow metal is being pulled in two directions as a hawkish Fed regime clashes with recession fears. After all, a Fed hiking cycle tends to be associated with rising recession risks, with the US5-30s curve already pointing to an elevated probability of a recession in the next twelve months. Notwithstanding, this hiking cycle differs from recent historical analogs as the Fed's ability to control inflation is limited, given that the supply-side is disrupted.”

“Gold bugs sniffing out a potential stagflationary outcome associated with lower growth but lingering inflation should consider that central banks, facing a credibility crisis, could also continue to raise rates for longer than they otherwise would. In this scenario, pricing for a Fed pivot would be less associated with recession odds than in prior episodes.”