Gold prices rose marginally as investors awaited Fed Minutes to assess the possibility of further rate hikes. Analysts are interpreting the effects of the FOMC minutes and assessing the technical outlook for gold.
Fed Minutes are coming, where investors will look for clues!
Data released Tuesday showed US business activity unexpectedly recovered in February, hitting an eight-month high. This indicates a resilient US economy and a tight labor market. Although gold is seen as an inflation hedge, rising interest rates increase the opportunity cost of holding bullion as it pays no interest. Matt Simpson, a senior market analyst at City Index, comments:
Gold is leaning on the ropes, but it’s not too bad given how high U.S. yields are moving, following a string of strong economic data pointing to a higher eventual Fed rate. Traders will be more sensitive to hawk cues in FOMC minutes that could affect gold prices. Gold has a better chance of testing $1,800 before testing $1,900 in the foreseeable future, given the markets’ expectations to re-price a higher final Fed rate.
“Gold may retest $1,830 support”
cryptocoin.com As we have reported, Fed Minutes will be released on Wednesday at 10:00 pm. The Fed increased interest rates by 25 basis points from January 31 to February 25. It is expected to raise benchmark interest rates above 5% by May, with the peak seen at 5.347% in July.
The dollar index fell 0.1%, making the dollar-priced bullion cheaper for buyers holding other currencies. Indicator US 10-year Treasury bond yields hit the highest level since November. According to Reuters technical analyst Wang Tao, gold could retest the $1,830 support and a break below it could open the way to $1,816.
“Fed officials’ hawk comments add salt to the wound”
Changing expectations about the Fed’s plans, along with rising US dollar and Treasury yields, have caused gold to slash its year-to-date gains. Lukman Otunuga, head of market analysis at FXTM, comments:
It’s been a tough month so far for gold, thanks to warm inflation data and strong employment that boosted Treasury yields from the US. The hawk comments from Federal Reserve officials added salt to the wound. Given that the precious metal is on track to experience its first monthly loss since October 2022, the bulls need to undo their spells. However, a hawkish Fed minutes to be released on Wednesday will likely add to the injuries, potentially pushing prices towards $1,800. Such a development may invite more negativity in the short and medium term.
Gold technical analysis before Fed Minutes
Market analyst Anil Panchal illustrates the technical outlook for gold as follows. Gold price is exploring a two-day downtrend as it hovers around $1,835 early Wednesday. In doing so, the shiny metal remains in its one-week trading range of $30.00, while traders await the Fed Minutes. It’s worth noting that geopolitical fears and the lackluster US Dollar’s multi-day highs are adding filters to gold traders.
Gold price remains motionless between the 100-day Exponential Moving Average (EMA) and the 50-day EMA after it broke the three-month support line, which is now resistance. Adding strength to the downtrend are the bearish MACD signals and a two-week descending trendline. However, it is worth noting that the nearly oversold conditions of the RSI (14) highlight the importance of the 100-day EMA at $1,821 as the key support.
Gold price daily chartOn the contrary, a bearish resistance line near $1,838 from Feb. 09 is constraining gold’s spike ahead of the 50-day EMA, which was around $1,853 by press time. Therefore, the gold price will remain on the bears’ radar unless it breaks the support-resistance line near $1,916 at the end of November. But space seems limited for yellow metal.
