- Gold bulls are being squeezed in a strong bearish correction.
- All eyes turn to the Fed as the next catalyst.
Gold price sold off nicely on Tuesday in textbook fashion as the technical analysis below illustrates. The yellow metal dropped from a high of $1,970 and melted into a low of $1,935. The fall follows a move up above $2,000 intraday Monday, the highest level since Russia's invasion of Ukraine early last year.
Gold prices are pressured with the 10-year government bond rebounding on Tuesday, making it more appealing to hold Treasurys than gold as we head into the Federal Reserve interest rate decision on Wednesday. The central bank is expected to raise interest rates by a quarter-percentage point which could further cool gold's rally even further.
All in all, it was a risk on tone across markets that has weighed on the Gold price whereby the market now sees a roughly 80% chance of a 25bp hike. However, analysts at ANZ Bank argued that ´´this would ultimately support the precious metals sector.´´
Meanwhile, analysts at TD Securities argued that, ´´looking forward, we still could see substantial CTA buying activity above the $2,045 mark, but the journey towards this key trigger level will require additional discretionary interest. This puts the focus on the Fed meeting, where we expect a dovish 25bp hike.´´
´´In contrast,´´ they said, ´´we could see some marginal selling activity below the $1,950 mark, but expect that the combination of strong physical demand and resurgent investor flows should keep prices from tumbling.´´
Gold technical analysis
In the prior analysis, above, it was stated that ´´the Gold price could be forming a topping pattern in the right-hand shoulder of the head and shoulders on the 4 and 1-hour charts:
Gold price update
The head and shoulders played out and now the price is on the backside of a critical trendline.
However, there are prospects of a meanwhile correction into the Fibonacci scale prior to the next surge to the downside.
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