Gold Price Forecast: Facing Steepest Weekly Decline in Months Amid Fed’s Hawkish Stance

Highlights

• Gold prices drop due to potential Fed rate hikes.
• Dollar’s strength diminishes gold’s appeal to international investors.
• Labor market concerns arise alongside Fed’s aggressive rate hikes.

Overview

Gold prices are set for their largest weekly decline since February as the U.S. Federal Reserve’s potential interest rate hikes bolster the dollar, causing gold to drop to a three-month low. The dollar index remains strong, making gold less appealing to international investors. This decline in gold aligns with rising yields and the hawkish remarks made by Fed Chair Jerome Powell and other officials. Powell stated that the central bank will proceed with interest rate adjustments cautiously, signaling a slowing pace of monetary policy tightening.

Fed’s Bowman Backs Need for Rate Hikes

Furthermore, Fed Governor Michelle Bowman emphasized the need for additional rate increases to combat inflation. With higher interest rates, gold loses its shine, and investors now anticipate the Fed resuming its tightening policy in July after maintaining rates at the June meeting.

Powell’s recent comments aligned with the central bank’s guidance following its latest policy meeting, where they decided to keep interest rates unchanged. However, they acknowledged the expectation of two 25 basis point increases this year. This marked the first pause in the Fed’s year-long campaign to address inflationary pressures and stabilize the economy.

Steady High Jobless Claims Raise Concerns

Steady high jobless claims raised concerns about the labor market, indicating a potential weakening alongside the Fed’s aggressive rate hikes. Investors analyzed the data, contemplating the future of Fed monetary policy.

Gold Prices Slide Amid Rate Hike Prospects

In conclusion, gold prices have been negatively impacted by the prospects of interest rate hikes, strengthening the dollar and pushing gold to a multi-month low. With the Fed’s cautious approach and the expectation of further rate increases, gold’s appeal has diminished. Additionally, concerns over the labor market and the Fed’s tightening policy continue to influence investor sentiment.

Gold Outlook Bearish

Short-term forecast: The outlook for gold remains bearish as the potential for additional interest rate hikes. A strong dollar will also continue to weigh on the precious metal’s performance.

Technical Analysis

The analysis of the Comex Gold market indicates a bearish tone. The current price of 1926.80 is slightly lower than the previous close, suggesting some selling pressure. Both the 200-4H and 50-4H moving averages are above the current price, indicating a bearish outlook. The RSI reading of 31.71 suggests weaker buying pressure, while nearing oversold territory. The price is below the main support area and far from the main resistance area, further supporting the bearish sentiment. Based on these indicators, it is likely that the market will continue its downward movement.