The Federal Reserve is due to release the statement from their February meeting. What can we expect and how can it affect the gold market?

The Fed is not expected to make a move on interest rates today. The market odds of a rate hike this month are only 4 percent, according to the CME’s FedWatch tool. So the market has already decided: no moves in February. Does it mean that the upcoming monetary statement will be insignificant? Not really. This is the first FOMC meeting in 2017, which could set the tone for the rest of the year. Investors, as always, will seek clues on future Fed’s actions.

As a reminder, in December the FOMC members forecasted three hikes in 2017. However, traders have become skeptical. Markets are now pricing in just two rate hikes this year. Therefore, if the Fed’s hawkish message is strengthened in today’s monetary statement, the price of gold is likely to decline. On the contrary, if the Fed adopts a more dovish stance, gold may appreciate gain.

What might we expect from the statement, then? Well, although not all recent data was positive, the FOMC is likely to express further confidence in the economy and the labor market, while the rise in inflation could entail a more upbeat tone in the statement. On the other hand, the Fed may point out the current uncertainty surrounding fiscal policy, which may require a more patient stance, especially given the changes in the voting members of the FOMC this year and a slightly more dovish composition.

To sum up, today the Fed is due to release its monetary statement. There is no real possibility that the U.S. central bank will hike interest rates, but investors will seek comments on reflation, Trump’s fiscal policy, risks to the economic outlook and the Fed’s balance sheet. Any suggestions that the Fed could hike interest rates in March should be bullish for the U.S. dollar and bearish for the yellow metal, while a non-committal stance would be neutral or even supportive for gold prices. Stay tuned!