Gold is trading well below the $1,700 mark. For the Fed’s meeting next week, an increase of 75 basis points is already fully priced in. Strategists at Commerzbank analyze how the yellow metal could react to such a move.

Recovery potential in the medium-term

“If the Fed raises its interest rates by more than 75 bps, the gold price risks sliding further. However, this will depend not only on how quickly the Fed hikes its rates in the short-term but on how probable it is that it will stick with high interest rates.” 

“If the market is prompted by the meeting to price in higher rates in the short-term but anticipates stronger rate cuts due to recession fears next year, the gold price is likely to suffer less.” 

“We still envisage recovery potential in the medium-term because we expect that the Fed will lower its interest rates slightly again next year in response to a contracting economy.”