Gold Price Forecast: Near 4-Month Lows as Stronger Dollar, Powell Remarks Weigh

Highlights

• Gold prices struggle near Mid-March low due to stronger dollar and Powell’s hawkish comments.
• Divergent central bank rate policies affect market sentiment and discourage gold investment.
• Market participants await economic data and inflation indicators for further insights.

Overview

Gold prices remained near a Mid-March low as a stronger dollar and hawkish comments from U.S. Federal Reserve Chair Jerome Powell weighed on the precious metal. The dollar index’s rise made gold relatively expensive for holders of other currencies. Powell’s remarks reinforced expectations of higher interest rates for a longer duration, diminishing the allure of gold due to the higher opportunity cost. Powell suggested the possibility of two more rate hikes and projected that inflation would not reach the 2% target until 2025.

High Rates Weigh on Gold Demand

The differing approaches of central banks towards interest rates were evident, with the Fed and Bank of Japan maintaining steady rates while the Bank of England and European Central Bank raised rates by 50 and 25 basis points respectively. Investors now perceive an 81% chance of a 25-basis point rate hike in July, followed by a period of rate stability. The prospect of higher interest rates discourages investment in non-yielding gold.

Traders Await Key US Economic Data

Market participants are eagerly awaiting U.S. jobless claims, final first-quarter GDP numbers, and personal consumption expenditures (PCE) data for May. Analysts anticipate the core PCE, the Fed’s preferred inflation gauge, to show a year-over-year basis of 4.7%, well above the 2% target set by the central bank.

Bearish Due to Strong Dollar, Hawkish Powell

In summary, gold prices struggled near a Mid-March low due to a stronger dollar and hawkish comments from Powell. His remarks fueled expectations of higher interest rates. The divergent rate policies of central banks added to the pressure on gold. Investors were closely monitoring economic data and inflation indicators for further insights into the market.

Technical Analysis

Gold market sentiment remains bearish as the current 4-hour price of 1912.80 sits below the 200-4H moving average of 1964.70 and the 50-4H moving average of 1937.00. The 14-4H RSI reading of 32.98 indicates an oversold condition.

While the market shows slight upward movement from the previous close, it remains within the main support and resistance areas of 1899.80 to 1889.50 and 1943.20 to 1949.00, respectively. This suggests a continuation of the bearish trend. Traders should monitor price action for potential reversals or confirmation of the prevailing bearish sentiment in the Gold market.