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Investors worry about Fed action and escalating tensions in Ukraine

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Although it has long been known that the Fed has completed its monthly asset purchase cuts and that it will raise rates, there are concerns about the Federal Reserve’s plan to reduce inflationary pressures by tightening monetary policy. However, the main question is how hawkish or aggressive their renewed monetary policy will be.

In other words, the situation will become clearer after the publication of the renewed monetary policy statement and Powell’s press conference. The statement as well as the press conference could reveal the Fed’s plans to cut its asset list, which is approaching $9 trillion. This will also confirm whether the November reduction process will end in mid-March. Moreover, market participants will see at what pace the Fed intends to raise rates over the next two years.

Historically, gold investors have reduced their investments in this metal before a rate hike. After a cycle of six months, they will choose gold again. However, this time things are a little different, as market expectations seem to be too aggressive.

There is also real concern about rising geopolitical tensions over Russia’s build-up of troops and equipment on its border with Ukraine and possible retaliation by the US and NATO. Although Russia has not invaded Ukraine, the possibility of this situation has provoked reactions from NATO and the US. NATO sent ships and fighter jets to Eastern Europe. According to Reuters, NATO said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets. Reuters also reports that as many as 8500 US troops have been put on heightened alert for a possible deployment in the event of a Russian invasion of Ukraine.

These concerns gave strong support to gold, pushing it to its highest level since mid-November.

The material has been provided by InstaForex Company – www.instaforex.com

USD/CAD analysis and forecast for January 26, 2022

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