With the effect of the Federal Reserve, which has risen to a 40-year high in the USA and started 50 basis points interest rate hikes to control the inflation that got out of control, the Bitcoin-led cryptocurrency market has entered the domination of the bears, while gold slides down from its climbing peaks. Hence, the Fed’s next moves have become the focus of gold and crypto investors.
FOMC minutes will set the agenda for the week!
Following the Fed speakers to anticipate the Fed’s next steps and catch clues, markets are receiving mixed signals. However, the minutes of The Federal Open Market Committee (FOMC) meeting, where the Fed funds rate is determined, are important to clarify the signals. The minutes of the most recent FOMC meeting, where the interest rate was increased by 50 basis points, will be published on Thursday, May 25 at 21.00 CEST.
As we have mentioned in the news of Cryptokoin.com, although Fed Chairman Jerome Powell states that 75 basis point increases are not on the table in the upcoming meetings, the markets consider an increase in this rate as a possibility, although not at a high rate. It is expected from these meeting minutes that there will be signs about whether the Fed will act more like a hawk or a dove.
What do the FOMC minutes mean for the gold and crypto market?
The FOMC can significantly influence the cryptocurrency market, led by gold and Bitcoin, as it sets interest rates and other parameters of monetary policy. Gold is a non-yielding asset and therefore highly sensitive to changes in interest rates. Cryptocurrencies, on the other hand, come to life when risk appetite is high. Therefore, it is adversely affected by interest rate hikes, which reduce risk appetite.
The yellow metal also serves as a safe-haven asset, thus responding to signals sent by FOMC members about the state of the US economy. That’s why gold prices are often moved by FOMC monetary policy statements or meeting minutes.
In the Fed’s tightening cycle, which began several years after the Great Recession, gold prices were strongly correlated with market expectations of future FOMC actions or the pace of interest rate increases. When the FOMC is more dovish than expected, the price of gold often rises as it means a slower rate of tightening and lower real interest rates. On the contrary, when the FOMC is more hawkish than expected, gold prices often fall as it suggests a more aggressive normalization of monetary policy and higher real interest rates.
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