Gold Price Analysis: XAU/USD bears sink their teeth into the market on hawkish Powell pivot


  • Spot gold prices have dropped back to the $1830 area in recent trade amid pre-Fed profit-taking and technical selling. 
  • All eyes are on the Fed's policy announcement at 1900GMT and press conference with Fed Chair Jerome Powell at 1930GMT. 

Update: At $1,817.59, gold (XAU/USD) is moving towards the close and down some 1.65% after falling from a $1,850.11 high to test a low of $1,814.98. The drop came on the back of a hawkish twist at the Federal Reserve event on Wednesday.

Initially, the Federal Open Market Committee Statement offered little in the way of surprising truths with regards to the Fed's path of the balance sheet runoff and rate increases and markets responded in kind with little enthusiasm. However, volatility kicked in just ahead of the Fed's chair presser. 

Jerome Powell surprised markets with a hawkish pivot, commenting that the Fed could raise rates at every meeting if need be. Additionally, Powell said in the presser that the Fed could move faster and sooner than they did the last time which helped the US dollar to extend on pre presser gains as US 2-year yields jumped the biggest one day gain since 2020: 

As a consequence, the benchmark US 10-year yield rose to 1.855%. The US 30-year yields were moved to 2.172% and on the front end of the curve, US 2-year yields shot up to 1.095%.

DXY M5 chart

End of update

Spot gold (XAU/USD) prices have been under selling pressure in recent trade, dropping from the mid-$1840s prior to the US open to around the $1830 as the Fed monetary policy announcement at 1330GMT looms. A combination of pre-Fed profit-taking and short-term, intra-day technical selling have been cited as the reason for XAU/USD’s recent drop, with gold not receiving any impetus from subdued FX or bond markets, which are both in their typical pre-Fed lull. Starting with the technicians; since last week, gold had been supported by an uptrend, but this uptrend broke a few hours back, triggering some technical selling and a drop back to the $1830 support area.

Moving on to the pre-Fed profit-taking; gold has been performing well in recent weeks and is up more than 2.5% from its lows in the $1780 area printed back on the first day of the year. That solid run of recent gains has come despite a US dollar that has been strengthening (over the last two weeks, anyway) and US bond yields, which have remained well support close to multi-month/year highs. The run higher this year in US bond yields (the 10-year is more than 25bps higher on the year already) has come amid increased bets on Fed hawkishness, something that would normally hit gold.

However, sharp equity market downside (since the start of the year) and geopolitical tensions appear to have infused gold with some safe-haven demand. But that doesn’t mean Fed tightening isn't still a threat to gold and it seems as though on Wednesday, traders were eager to book some profit on long XAU/USD positions just in case the Fed hits markets with a hawkish surprise (which would likely be gold negative). In a scenario where a hawkish surprise sends the US dollar and yields surging, key areas of support to watch for gold include last week’s low in the $1805 area, then the annual low just above $1780. In a bullish gold scenario, Tuesday’s highs just above $1850 would be the key resistance to watch.

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 Join Telegram

Recommended content


Recommended content

Editors’ Picks

AUD/USD buyers attack 0.7100 amid sluggish Asian session, second-tier Aussie data eyed

AUD/USD buyers attack 0.7100 amid sluggish Asian session, second-tier Aussie data eyed

AUD/USD grinds higher after bouncing off 21-DMA, eyes to snap two-day downtrend. The pair picks up bids to refresh intraday high around 0.7100, extending the previous day’s rebound from 0.7035, amid broad US dollar weakness. RBA’s Ellis hints at more rate rises, FOMC Minutes raised doubts on rate lifts post-September.

AUD/USD News

EUR/USD eyes to regain 1.0700 post-Fed Minutes, US GDP in focus

EUR/USD eyes to regain 1.0700 post-Fed Minutes, US GDP in focus

EUR/USD stays on the way to reverse the pullback from a monthly high, picking up bids to 1.0685 during early Thursday morning in Asia. Second reading of Q1 2022 US GDP, Jobless Claims and housing data to decorate calendar amid multiple holidays in Europe.

EUR/USD News

Gold defends bounce off weekly support near $1,850 ahead of US GDP

Gold defends bounce off weekly support near $1,850 ahead of US GDP

Gold  treads water around $1,855, defending the previous day’s corrective pullback from a one-week-old support line during Thursday’s Asian session as sluggish markets and a lack of major data/events seem to restrict the metal’s immediate moves.

Gold News

What needs to happen for Axie Infinity price to recover

What needs to happen for Axie Infinity price to recover

Axie Infinity price displays reasons to believe in further momentum to the upside. Traders should approach the digital asset with relative caution, looking for one more fake-out before the rally occurs. Axie Infinity price appears to be unfolding as an extended impulse wave down.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures