Australia and New Zealand Banking Group (ANZ) has warned of a break below $1,675 per ounce. According to the group, this break risks triggering a drop to $1,600 an ounce. So gold price is currently trading in a very dangerous price zone. ANZ’s price forecast came around the same time as the Fed’s decision to raise rates.
Fed announces interest rate decision
On September 21, the Fed’s Federal Open Market Committee (FOMC) meeting took place. cryptocoin.com As we have announced, FED Chairman Jerome Powell announced that they decided to increase interest rates by 75 basis points after the meeting. In fact, 75 basis points was an increase that most market participants had expected. Therefore, the markets were not affected much by the FED’s rate hike. Meanwhile, prior to the Fed’s decision, US Treasury yields were putting the gold price under heavy pressure.
On September 21, the 2-year Treasury yield exceeded 4% for the first time since 2007. The inversion of the yield curve between short-term and long-term interest rates continues to grow, increasing the risk of recession. After the Fed’s interest rate decision, the price of an ounce of gold fell from yesterday’s level of $ 1,675. Gold, which saw $ 1,666 on the night of September 22, rose after this level. At the time of writing, the price of an ounce of gold was trading at $ 1,678.
“The big wave is coming”
Meanwhile, ANZ senior market analyst Daniel Hynes and commodity strategist Soni Kumari released a report, sharing their latest forecasts. The report warned investors for commodity markets based on the FED’s future stance:
“The Fed has made it clear that it will tighten further. In an environment where inflation is stubbornly high, rate hikes will be more and more aggressive. This will also reveal weakness in the euro as economic conditions worsen. With the help of these, it is highly probable that the US dollar will strengthen further. Deteriorated liquidity and higher US Treasury yields will increase the risk premium.”
However, “the risk of stagflation or a direct recession may eventually reverse this,” Hynes and Kumari say. According to them, the long-term recession risk will revive the assets defined as safe-haven. In addition, analysts add that if the FED reduces its tightening policies and inflation remains high, the gold price will appreciate. In other words, while the dollar is still the preferred asset, it would be beneficial for us to follow the policies of the FED in the future.
“Gold will see these levels in the coming period”
According to ANZ, the short-term technical picture is bearish for gold. Analysts say a break below $1,675 will bring the price of gold down to $1,600. They also point out that sellers could push the price below the $1,600 level. According to them, upside resistance is located at $1,700. An upside break of this level will trigger a rally to the next resistance level at $1,735. However, in the short term, gold must retrace the critical $1,800 resistance for it to rise.
Analysts say the outlook for gold worsened in September due to the dollar. They also predict that the US dollar will stay stronger for a long time. ANZ’s final forecast is for gold to end the year at $1,620. Then they expect a drop to $1,575 in the first quarter of 2023. But they are on the rise for next year. According to them, the price of an ounce of gold will rise to $ 1,650 towards the end of next year.
