Gold has found renewed strength this week as the banking crisis reignites and the US Treasury warns of a June 1 debt ceiling. But the main event will be the FOMC decision at 2 pm ET.
Gold is at a session high and up $10 to $2026, which is the highest since April 13. That builds on $30 gain yesterday.
The levels to watch now are the April high of $2048 and the 2020 all-time high of $2074. A dovish Fed would go a long way towards breaking both. Expect bids in gold if the FOMC removes language from the statement that says "some additional policy firming may be appropriate."
The broadly weakening dollar is also helping gold as safe haven assets shine. US 5-year yields are down 7 bps today to 3.39%, which is the lowest since April 7.
Though a dovish Fed might help in the short term, the best-case scenario for gold in the longer-term might be an overly-hawkish Fed. That would lead to a hard landing later and the potential for rapid rate cuts along with fiscal stimulus.
At the same time, there's a major tailwind for gold as Russia, China and other countries that are unfriendly with the US tilt reserve holdings away from US dollars and towards gold.