Gold drops and pops following the Fed keeping rates unchanged (targets 1.5% to 1.75%)


  • Gold is unsure on what direction to take following a rather benign outcome from the Fed.
  • The dollar is lower, gold a little firmer following an initial drop and yields are steady. 
  • Markets a little higher on the news that the Fed is on hold. 

Gold is trading at $1,570 at the time of writing following the Federal Reserve's interest rate announcement. Gold has travelled from a low of $1,563. to a high of $1,574.

The DXY has fallen to a low of 97.94 form a high of 98.19 and US 10-Year Treasuries are trading between 1.6050% and 1.6680% at 1.6170% at the time of writing. Also, US stocks climbed as the Federal Reserve signaled it will remain on hold and after a flurry of solid earnings from bellwethers. The S&P 500 Index held on to its gains as the central bank signalled policy is “appropriate” to support growth. Markets will now look to Governor Jerome Powell for clues as to how the Fed is placed with respect to inflation, employment, the Sino-American trade deal and the coronavirus risks.

Key notes from Fed statement

  • Target rate remains at 1.5% to 1.75%
  • Interest rate on excess reserves 1.6% versus 1.55%
  • The decision is unanimous.
  • Survey based inflation expectations a little changed.
  • Current policy appropriate to sustain expansion.
  • The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective.
  • Labor market remains strong and that economic activity has been rising at a moderate rate. 
  • On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. 
  • Unemployment rate has remained low. 
  • The labor market remains strong and that economic activity has been rising at a moderate rate. 
  • The Committee decided to maintain the target range for the federal funds rate at 1‑1/2 to 1-3/4 percent.
  • The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective.
  • The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.
  • Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. 
  • In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.

Gold depends on the virus, US dollar and global recovery

Meanwhile, we have seen gold struggle at the start of this year as US stocks seem relentless, and have even managed to stage a recovery (ahead of the Fed) in the sessions yesterday and today. The US dollar has also been picking up the flack in the FX space and gold on Tuesday lost 0.5%, continuing to pull back from a more-than-six-year high marked at the start of this year in the $1,611s.

However, the spread of coronavirus cases and its potential impact on the global economy should remain as a bullish factor for gold. The coronavirus has now infected at least 5,327 people in China, while the death toll in the country has risen to 132 and is spreading throughout the world – keeping risk-on psychology on edge while US yields remain at the lowest levels since October of last year. Can the US dollar hold up for much longer? That is probably where the upside is for gold in the near-term, and longer-term, depending on how the virus and the global recovery plays out.

Gold levels

As per the article yesterday, the price of gold has been found floundering between 1580 and the 1560s following a surge at the start of the year to the highest levels since March 2013 at $1,611.

However, the divergence on the weekly chart between momentum and price is alarmingly and a break in price to the downside could be the trigger for a top for the medium term with a downside target of 1530 ahead of 1440/50. On the other hand, bulls will be looking for a dicount here and preying price holds up and corrects higher again,

Gold Price Analysis: Bulls looking for a discount in $1560s

XAU/USD

Overview
Today last price 1570.48
Today Daily Change 1.28
Today Daily Change % 0.08
Today daily open 1569.2
 
Trends
Daily SMA20 1556.58
Daily SMA50 1508.87
Daily SMA100 1500.4
Daily SMA200 1447.45
 
Levels
Previous Daily High 1583.42
Previous Daily Low 1567.18
Previous Weekly High 1575.88
Previous Weekly Low 1546.4
Previous Monthly High 1525.1
Previous Monthly Low 1454.05
Daily Fibonacci 38.2% 1573.38
Daily Fibonacci 61.8% 1577.22
Daily Pivot Point S1 1563.11
Daily Pivot Point S2 1557.03
Daily Pivot Point S3 1546.87
Daily Pivot Point R1 1579.35
Daily Pivot Point R2 1589.51
Daily Pivot Point R3 1595.59

 

 

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.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD: Bulls battle 200-day EMA ahead of US PCE Inflation

EUR/USD is holding onto the recent recovery above 1.1900, up for first weekly gain in four. US dollar ignores firmer Treasury yields on fears of the PCE inflation gauge confirming the Fed’s hawkish tilt. Risk appetite remains positive, as Biden’s stimulus joins EU-UK trade optimism. Fedspeak eyed as well.

EUR/USD News

GBP/USD attempts recovery toward 1.3950 as USD softens ahead of PCE data

GBP/USD bounces towards 1.3950, as the US dollar eases across the board amid risk-on mood. US infrastructure stimulus deal lifts the sentiment, as the pound recovers from the dovish BOE-led blow. Mixed updates on Brexit, Delta Plus covid variant keeps bears hopeful.

GBP/USD News

Gold prints first weekly gains in four around $1,780, US PCE data eyed

Gold stays on the front foot near $1780 in early Europe. US Treasury yields retreat, DXY struggles ahead of the Fed’s preferred inflation gauge of inflation. Market sentiment stays upbeat on US stimulus, trade headlines. Fedspeak also joins the watchers’ list for fresh impulse.

Gold News

Cardano eyes another 15% upswing

Cardano price rallied significantly over the past 24 hours in an attempt to recover the losses piled up after the recent crash. Although a minor retracement seems likely after a quick run-up, the uptrend appears to be intact.

Read more

US PCE inflation preview: Data likely to reaffirm FOMC's hawkish tilt

The US Bureau of Economic Analysis will release the PCE inflation report on Friday, June 25. Markets expect the Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, to rise to 3.4% on a yearly basis in May from 3.1% in April.

Read more

Forex MAJORS

Cryptocurrencies

Signatures