Gold as seen a safe haven for investors all around the world has turned its way round into bearish. The gold has shown this bearish trend with respect to the upcoming Fed stimulus and investors are awaiting it to fall as high correlation is seen between falling gold prices and Fed’s stimulus. Investor’s sentiment favors the ‘Septaper’ to reduce the $85 billion in monthly asset purchases. Also, the cost of living index rose by 0.1% in August from July which rose less than forecast thus making the gold less supportive for the hedge against inflation.

Gold for immediate delivery fell by 1.4% and bullion for December delivery slipped down by 1.3% on the COMEX. Similarly, the second precious metal silver slid down by 1.2% for immediate delivery. Investors are not prone to hold gold before the Fed’s meetings as the double whammy of slid of gold prices and Fed’s meeting are in the board.

The most awaited economic indicators FOMC economic projections, FOMC statement and Federal Funds rate are on the roadway impacting the investor’s sentiment and direction for the world economies. So, what are they?

FOMC economic projections are submitted by the members of FOMC assessing the real output growth, the unemployment rate, inflation, and targeted federal funds rate for each current year and over the longer run.

The Federal Open Market Committee releases a short statement after each of its meetings, announcing any change in monetary policy and assessing the risks the economy is facing. There are two main risks an economy can face: Slowing growth and rising inflation.

The federal funds rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight on uncollateralized basis, used to satisfy the reserve requirement. The weighted average of all rates between banks called effective funds rate is tried to move along the Federal Funds target rate determined by FOMC meetings by using open market operations to sway the money supply. The objective is to achieve the maximum rate of economic growth consistent with price stability and moderate long-term interest rates. A decrease in the federal funds interest rate stimulates economic growth, but an excessively high level of economic activity can cause inflation pressures. On the other hand, an increase in the federal funds interest rate will curb economic growth and help contain inflation pressures, and thus can promote the sustainability of an economic expansion, but too large an increase could retard economic growth too much.

The FOMC meeting is on the deck today at 11:45pm NST and is considered as the most influential news in the financial systems all around the world. Investors are on a ‘fog to clear’ situation for their investments till the release of FOMC meeting report.