Gold Price Forecast: Hovering Near 3-Month Low Amid Fed Rate Hike Speculation

Highlights

• Gold remains near a three-month low amid talks of Fed rate hikes.
• Market believes rate hikes nearing end, but potential decline looms.
• Economic indicators and central bank decisions crucial for gold’s trend.

Overview

Gold prices were little-changed on Thursday amid renewed talks of interest rate hikes by the U.S. Federal Reserve, keeping the bullion near a three-month low. Fed Chair Jerome Powell’s remarks to lawmakers indicated the likelihood of further rate increases if the economy continues its current trajectory.

Fed Eyeing Future Rate Hikes

Despite the recent pause in rate hikes, the central bank has emphasized the possibility of future increases, with two more expected this year. Investors analyzed housing starts and building permits figures, which exceeded forecasts, while assessing the broader U.S. economic outlook.

Gold Stable Amid Rate Hike Speculation

While higher interest rates dampen gold’s appeal, the market believes that the central bank is nearing the end of its rate hikes, explaining gold’s relatively stable performance. However, a potential decline could be on the horizon if the U.S. labor market and consumer inflation continue to show strength. In the short term, traders are projecting gold to trade within the range of $1,850 and $1,900 leading up to the next Fed decision in July.

Fed’s Bostic Hints at Rate Hike Delays

Market expectations, as indicated by the CME FedWatch tool, suggest a 72% chance of a 25 basis point hike next month. Atlanta Fed President Raphael Bostic has hinted at a delay in further rate increases until after the July meeting. The dollar index remains near recent lows, potentially bolstering gold’s appeal for overseas investors.

Weekly Jobless Claims on Tap

Looking ahead, traders eagerly await the release of weekly U.S. initial jobless claims data, a key indicator of the country’s economic health. Additionally, the Bank of England’s rate decision is highly anticipated following higher-than-expected inflation data, with market sentiment divided on the magnitude of the potential hike.

Short-Term Forecast:  Cautiously Bearish

The short-term forecast for gold is cautiously bearish. Uncertainty over the timing of Federal Reserve rate hikes is contributing to this outlook. Economic indicators and central bank decisions will determine gold’s future trend.

Technical Analysis

Gold sentiment is slightly bearish as the price hovers around 1941.20, just below the previous 4-hour close. The 200-4H moving average stands at 1980.50, indicating a bearish bias. The 50-4H moving average at 1961.00 reinforces the downward trend. The 14-4H RSI reading of 36.70 suggests moderate bearish momentum.

The main support area lies between 1942.50 and 1936.00, offering a potential entry point for buyers. While the main resistance area is observed between 1983.00 and 1988.00. Overall, the market leans towards a bearish outlook. However, potential shifts in sentiment will be contingent on significant developments around the support and resistance levels.