Gold Prices Under Pressure

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Gold Prices Under Pressure

Gold Prices Under Pressure Amid A Hawkish Fed

Gold prices (XAU/USD) have gone down amid a fresh supply as investors are now favoring USD due to higher interest rates. Last Friday, the Fed delivered a surprise of a hawkish nature, which led to a downside in Gold, Silver, & other metals.

Earlier, the Fed was supposed to deliver 3 rate cuts but has now gone down to just 1 this year. This decision was cheered by the US bond yields, which in turn pushed the USD higher.

Just One Rate Cut This Year

For now, the USD is sitting at the highest levels only seen during May as the funds are moving out of non-yielding assets such as Gold.

While the Fed dot plot now lists just one rate cut, some still believe in at least 2 rate cuts this year from the Federal Reserve. According to them, the inflationary pressure is easing in the USA which means there's little reason to keep rates at such elevated levels.

In the short-term, some more selling will be seen in the Gold before it can resume its bullish trend once again. While the rates are expected to remain high, let's not forget that geopolitical tension is also at all times high.

The technical analysis of the Gold (XAU/USD) shows that traders are waiting for the Gold to break the $2300 level and convert it into resistance. Once this happens, the Gold prices will go through more downside and send it towards $2200 and then $2100.

Another scenario is that the 50 SMA present at $2344 - $2345 will act as a strong support and will send it back towards the $2390 - $2400 area.

Either way, Gold is likely to stay under pressure in the short term as the era of high rates means the investors will prefer the USD, EUR, and other currencies. Meanwhile, let's not forget that central banks around the world continue to buy more gold bullion which is likely to support the prices.

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