Gold prices faced some selling pressure on Thursday morning during the European session. This dip seems to have broken a three-day winning streak, hitting a weekly peak around the $2,341-$2,342 mark on the previous day. The Federal Reserve’s unexpected hawkish stance on Wednesday overshadowed softer US consumer inflation data, leading to this decline.
Hawkish Fed Impact
The Federal Reserve’s recent announcement indicated only one rate cut in 2024, down from the three cuts projected in March. This change diverted investment flows away from non-yielding assets like gold. As a result, gold price faces selling pressure in the market.
Strengthening US Dollar
The Fed’s updated projections have driven US Treasury bond yields higher and boosted the US Dollar. A stronger US Dollar typically undermines gold prices since gold is denominated in USD. However, geopolitical tensions in the Middle East and political uncertainty in Europe could potentially limit deeper losses in gold, although gold price faces selling pressure due to these developments.
Economic Indicators and Market Reactions
Investors are now looking at Thursday’s US economic data, including the Producer Price Index (PPI) and weekly Initial Jobless Claims, for short-term trading opportunities. The initial market reaction to the softer US consumer inflation data faded quickly after the Fed’s announcement, which hurt gold prices further. Consequently, gold price faces selling pressure in the immediate term.
Technical Analysis
Bearish Indicators
From a technical perspective, gold’s recent decline near the 50-day SMA (Simple Moving Average) support-turned-resistance indicates bearish sentiment. Daily chart oscillators are in negative territory, suggesting further depreciation and reinforcing that gold price faces selling pressure.
Support Levels
Further declines may find support around the $2,300 level, with stronger support near the $2,285 horizontal zone. A break below these levels could trigger additional selling, potentially driving gold prices towards the $2,254-$2,253 region and beyond to the $2,225-$2,220 area, eventually aiming for the $2,200 mark.
Resistance Levels
Conversely, any strength beyond the $2,325 mark may face resistance around the 50-day SMA, currently near $2,345. A move past this level could target the $2,360-$2,362 supply zone, and clearing this zone might allow gold prices to retest the previous week’s high around $2,387-$2,388 and potentially reclaim the $2,400 mark. Despite these potential gains, gold price faces selling pressure near resistance points.
Conclusion
Gold prices are experiencing pressure due to the Federal Reserve’s hawkish stance and a stronger US Dollar. While short-term economic data may provide trading opportunities, technical indicators suggest potential further declines. However, eopolitical and political factors could support gold prices.
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