Gold prices, which are measured in XAU/USD, faced new selling pressure on Thursday, causing them to drop after recovering slightly from a low point that lasted almost four weeks. The reason behind this drop was Federal Reserve Chair Jerome Powell’s remarks on Wednesday. He said that inflation levels were too high, and it wasn’t clear how quickly they would come down. This suggests that the Federal Reserve might keep interest rates higher for a longer time. When interest rates are high, it tends to boost yields on US Treasury bonds, making them more attractive than gold, which doesn’t provide any interest. As a result, the demand for gold decreases, leading to a drop in its price.
In simpler terms, besides the reasons mentioned earlier, there’s an overall positive feeling about taking risks in the market, which is also causing gold prices to go down a bit. Additionally, the US dollar is not doing so well because fewer people want to buy it. This is partly because Jerome Powell, the head of the US Federal Reserve, said there’s not much chance of interest rates going up again soon. This could help gold prices stay somewhat stable and not drop too much before the important US Nonfarm Payrolls report comes out on Friday.
Daily Market Digest: Gold Prices Pressured by Fed’s Hawkish Stance and Positive Market Sentiment
- Federal Reserve Chair Jerome Powell cautioned on Wednesday that interest rates would stay high for a while longer because inflation has been slowing down recently. This stance acts as a challenge for gold prices.
- US Treasury bond yields bounced back a bit from their decline after the Federal Open Market Committee (FOMC) meeting, which helped increase demand for the US Dollar. This rise in the dollar limits the potential gains for gold since it doesn’t offer any interest.
- Global market sentiment improved after Powell hinted that the Fed’s next move could be lowering interest rates. This undermines the appeal of safe-haven assets like gold.
- With geopolitical tensions easing, the trend for gold seems to be downward, though there isn’t a strong rush to sell, which suggests cautiousness among bearish traders.
- Investors may choose to wait on the sidelines before the release of the Nonfarm Payrolls (NFP) report on Friday, which is a closely watched indicator of US employment.
- Thursday’s economic calendar in the US includes Challenger Job Cuts, Weekly Initial Jobless Claims, and Trade Balance data. These releases might provide short-term trading opportunities.
Technical Analysis: Gold Price Holds Firm Above $2,300 Threshold; Bulls Eyeing 50% Fibonacci Level for Momentum
In simpler terms, if the gold price falls below $2,300, it may find support around $2,280, which is the halfway point of a previous price increase. If it drops below $2,280, it could keep falling towards $2,268-2,265 and then down to $2,230-2,225 and eventually to $2,200.
On the other hand, if it rises above $2,335, it might face resistance around $2,352-2,353, and if it breaks through that, it could climb to $2,371-2,372 and even up to $2,400 and the all-time high of $2,431-2,432 reached on April 12th.
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