Gold prices forecast fell to their lowest in a week on Thursday, marking the third day in a row of declines. This drop happened after the Federal Reserve shared its recent meeting details, showing that interest rates will stay high for some time. Earlier in the week, gold reached a high of $2,449.89 but has since dropped 3.6%, hitting its lowest point since May 15th.
What the Federal Reserve Said
The Federal Reserve’s meeting notes show there’s no rush to lower interest rates. Some members even questioned if current high rates are enough to manage inflation. Many investors are holding onto their gold, showing they aren’t sure how soon rates will drop. The Fed is expected to only cut rates once in 2024.
Inflation Outlook
Despite some uncertainty, the Federal Reserve believes inflation will return to 2%. But they said it may take longer than expected. Right now, the interest rate is between 5.25% and 5.50%, and they might raise it more if inflation becomes a bigger problem.
Market Reactions
After the Fed’s report, U.S. Treasury yields increased slightly, and traders lowered their hopes for major interest rate cuts this year. Fed officials suggested rates will likely stay steady until at least September.
Physical Gold Demand
Since 2021, more people have been buying physical gold like jewelry or coins. But because prices are high, fewer people might buy it for non-essential purposes. Gold prices forecast have risen by 14.5% this year, mostly between March and May. In India, the second-largest buyer of gold, imports could drop by 20% in 2024 if prices remain high. People may choose to sell old jewelry instead of buying new.
Bearish Market Outlook
As the Federal Reserve keeps interest rates high and traders sell gold to make profits, gold prices could keep falling. Investors should be ready for more price drops as the market adjusts to Fed policies and inflation concerns.
Technical Analysis
XAU/USD has been dropping for three days in a row but remains in a correction phase. Long-term trends are still positive. In the short term, prices have been between $2277.34 and $2450.13. The market is currently trading above the key level of $2306.85.
If prices stay above $2306.85, it shows traders are still buying gold during price dips. However, if it falls below this level, prices could drop further to the 50-day moving average at $2306.86, which helps track long-term trends.
