- The direction of gold prices remains uncertain as the Federal Reserve’s commitment to maintaining higher interest rates for an extended period counteracts demand for safe-haven assets.
- Fed Chair Powell advocates for maintaining elevated interest rates until there is assurance that inflation will subside to the 2% target.
- Meanwhile, the United States issues warnings of potential sanctions against Iran in retaliation for their assault on Israel.
In the early American session on Wednesday, gold prices (XAU/USD) hover below the $2,400 mark, struggling to reclaim recent record highs around $2,430. Federal Reserve Chair Jerome Powell’s recent remarks underscore the central bank’s commitment to a prolonged restrictive policy stance. Powell and fellow policymakers lean toward maintaining elevated interest rates, citing persistent inflation and robust labor demand.
The outlook for prolonged higher interest rates supports the US Dollar and bond yields. Although 10-year US Treasury yields dip slightly, they remain near a five-month peak of around 4.70%. The US Dollar Index (DXY), gauging the Greenback against major currencies, stabilizes after hitting a five-month high close to 106.40.
Meanwhile, escalating tensions in the Middle East bolster gold’s appeal. Israel prepares to retaliate against Iran’s recent attack, despite US President Joe Biden’s stance against supporting Israel’s counterattack. Treasury Secretary Janet Yellen announced the intention to impose fresh sanctions on Iran following its aggression toward Israel. Such sanctions could potentially disrupt Iran’s oil exports.
Daily digest market movers: Gold price juggles inside Tuesday’s range
- Gold remains below the critical resistance level of $2,400, consolidating as Federal Reserve Chair Jerome Powell’s hawkish stance curtails upward momentum. Simultaneously, escalating tensions in the Middle East offer support to the precious metal.
- Powell’s recent remarks emphasized the need to prolong higher interest rates, citing ongoing concerns about inflation. Despite strong labor demand, Powell noted a slower-than-expected progress in disinflation during the first quarter, suggesting a continued need for restrictive monetary policy to achieve the 2% inflation target.
- The Fed’s confidence in inflation easing was shaken by unexpected increases in the March Consumer Price Index (CPI) and robust Retail Sales data, reinforcing expectations of persistent inflationary pressures.
- Geopolitical tensions in the Middle East contribute to gold’s appeal as a safe-haven asset. Israel’s preparations to retaliate against Iran’s recent airstrike, coupled with Iran’s aggressive response following an attack on its embassy in Syria, heighten concerns of broader regional instability, bolstering gold’s attractiveness to investors seeking refuge.
- Meanwhile, market focus remains on upcoming guidance from Fed policymakers regarding interest rates. Expectations suggest policymakers will reiterate the need for sustained higher interest rates until there is clear evidence of inflation stabilizing at the desired 2% level.
Technical Analysis: Gold price trades below $2,400
Gold price is maintaining a sideways trajectory within Tuesday’s trading range, hovering around $2,380. Despite this, upward momentum is constrained as indicators suggest a cooling-off period following extreme overbought conditions. The 14-period Relative Strength Index (RSI) on the daily chart is showing a slight decline from its peak around 85.00. Nonetheless, the broader demand for gold remains robust, indicated by the RSI holding within the bullish range of 60.00 to 80.00.
Looking towards potential downside, key support levels include the April 5 low near $2,268 and the March 21 high at $2,223.
