Gold Price Works To Edge Up As Monetary Policy Takes Center Stage

Gold has been an interesting commodity to watch as of late to say the least. Moreover, it seems as though another interesting week is on the horizons this week. At the moment, the price of the precious metal is working its way up from 2-week lows. However, news with regard to monetary policy will likely dictate movement throughout the rest of the week. Today, we'll talk about the monetary policy story, what it has to do with gold, and what I'm expecting to see from the precious metal in the week ahead.

A Week Of Monetary Policy Jitters

This week, gold investors are biting their nails as they await key monetary policy statements from two crucial regions. Here's what's going on...

• US Monetary Policy – The most important story with regard to the price of gold at the moment is the United States monetary policy. Lately, there has been a ton of mixed economic data released. However, with recent data leaning in the positive direction, many are expecting to see an interest rate increase from the Federal Reserve. Today marks the second day of the two day FOMC meeting, where this matter will be discussed. So, investors are going to be watching this story closely as it unfolds.
• Japanese Monetary Policy – The Japanese economy has been in a state of unrest for some time now. Following a recent election, prospects are starting to grow more positive. However, we know how unstable the Japanese economy can be, so anything can happen. Nonetheless, many are expecting to see a change to the monetary policy in Japan by the end of the week. This could lead to big economic movement, so it is important for gold investors to keep an eye on the story.

What Does This Have To Do With Gold

First and foremost, it's important to keep the safe haven properties associated with gold in mind. Essentially, when economic and market conditions are concerning, investors tend to look to gold as a way to keep their assets safe. With both of these stories having the potential to lead to massive economic implications, both in their respective regions and around the world, any developments in these stories can lead to changes in safe haven demand.

Another important factor to keep in mind here is that gold is priced using the USD. This creates a natural inverse relationship between the two. If the Federal Reserve decides to increase its interest rate, the value of the USD will likely rise. Adversely, inaction will likely lead to declines. So, the Fed's decision is likely to play a big role in the movement of the price of gold throughout the week.

What I'm Expecting To See

Overall, I'm expecting that gold will have a strong week, closing it off in the green. While the commodity may see headwinds from increasing Japanese stimulus leading to further declines in safe haven demand, I'm not expecting for the Federal Reserve to increase interest rates. With that said, I believe that the inaction from the Federal Reserve will cause the USD to decline, leading to support for growth in gold. Also, further inaction from the USD will likely lead to further questions with regard to the state of the global economy, offsetting any declines in safe haven demand seen as a result of Japan's decision. All in all, I'm expecting to see gains.