- Gold price is back in the red zone amid hawkish Fed tightening outlook, geopolitical risks.
- Markets ‘bought the fact, sold the rumour’ in the bright metal price post-Fed on Thursday.
- XAU/USD eyes daily close for bear pennant confirmation, downside remains favored.
Gold price is feeling the pull of gravity once again on Thursday, reverting to 29-month lows of $1,654, as the demand for the US dollar remains unabated amid escalating geopolitical tensions surrounding Russia and the West over Ukraine. Meanwhile, the hawkish Fed outlook also keeps investors on edge, as they prepare for higher borrowing costs. The Asian equities take the negative lead from their Wall Street peers while the US S&P 500 futures lose 0.60% on the day. The US Treasury yields regain the upside traction, with the benchmark 10-year rates heading back towards 11-year highs of 3.64%. Investors assess the implications of the aggressive Fed rate hike, in the face of renewed Russia’s aggression.
The non-interest-bearing yellow metal appears vulnerable with more tightening coming in from Switzerland and the UK in the session ahead. The Swiss National Bank (SNB) and the Bank of England (BOE) are widely expected to hike rates by 75 bps, respectively. The policy guidance will hold the key for the market. Meanwhile, should the tensions between Russia and the West intensify, the dollar could see the additional upside, as a flight to safety may remain full steam. Therefore, XAU/USD appears in a lose-lose situation in the near term.
Also read: BOE Interest Rate Decision Preview: GBP/USD braces for volatility storm, eyeing a 75 bps hike
The bullion enjoyed massive volatility and swung in either direction following the expected 75 bps Fed rate hike decision. In an initial reaction to the Fed announcement, the metal slumped to a fresh two-year low of $1,654 before reversely challenging the $1,690 hurdle during Fed Chair Powell’s press conference. The dollar corrected from 20-year highs of 111.58 after Powell and company projected the terminal rate of 4.6% in 2023, well below the highly anticipated 5% figure. Yields also pulled back quickly offering the much-needed respite to gold bulls. However, XAU/USD closed Wednesday with sizeable gains, drawing support from the renewed geopolitical fears. Russian President Vladimir Putin announced in early European hours that he had ordered partial military mobilization in Ukraine. Russia’s aggression was strongly condemned and opposed by the West.
Gold price technical outlook: Daily chart
Gold price briefly breached the rising trendline support at $1,664 on Wednesday but averted confirmation of a bear pennant by closing at the day around $1,674.
This Thursday, the price hovers below the abovementioned support amid renewed selling interest. Daily closing below the support is needed to validate the bearish continuation pattern.
The $1,650 psychological level will be the immediate line of defense, below which sellers will yearn for a sustained move towards the next support at around $1,643.
The Relative Strength Index (RSI) points south towards the oversold territory, near 34.00, suggesting that there is more room for the downside.
Conversely, any recovery attempts will need acceptance above the recent range highs near $1,680. The next upside barrier is aligned at around $1,700.
Daily closing above the latter is critical to unleashing the further recovery towards the bearish 21-Daily Moving Average (DMA) at $1,704.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD retreats below 1.0700 after US GDP data
EUR/USD came under modest bearish pressure and retreated below 1.0700. Although the US data showed that the economy grew at a softer pace than expected in Q1, strong inflation-related details provided a boost to the USD.
GBP/USD declines below 1.2500 as USD rebounds
GBP/USD declined below 1.2500 and erased the majority of its daily gains with the immediate reaction to the US GDP report. The US economy expanded at a softer pace than expected in Q1 but the price deflator jumped to 3.4% from 1.8%.
Gold drops below $2,320 as US yields shoot higher
Gold lost its traction and turned negative on the day below $2,320 in the American session on Thursday. The benchmark 10-year US Treasury bond yield is up more than 1% on the day above 4.7% after US GDP report, weighing on XAU/USD.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.