Gold price has eased after being in the green for two consecutive sessions. The bounceback of the US dollar has continued to curb its gains. As the week unfolds, the market will be reacting to the Fed interest rate decision.
Fundamentals
In a previous article, I indicated that gold price could soon find its short-term bottom. Based on both the fundamental and technical indicators, I am of the opinion that the precious metal may remain above the one-year low hit in the past week at $1,682.13.
The focus in the new week is on the Fed interest rate decision scheduled for release on Wednesday. While some officials approve a rate increase of 75 basis points, others are concerned that it could raise the risk of the US economy falling into a recession.
Either way, an environment of higher interest rates may continue to strengthen the US dollar. As is the case with other commodities, gold price tends to move inversely to the value of the greenback.
While the precious metal will likely remain under pressure in the short term, recession woes has more investors holding on to the asset. The 2 year/10 year yield curve remains inverted; an aspect that if often viewed a sign of an impeding recession. Gold’s conventional status as a safe haven in times of economic turmoil will continue to offer support to its price.
Gold price technical analysis
As at the time of writing, the precious metal was at 1,728.04 after hitting a one-year low of 1,682.13 late last week. As shown on a daily chart, it is still below the 25 and 50-day exponential moving averages despite the rebound. This is an indication of investors’ cautiousness ahead of the Fed interest rate decision.
In the short term, the range between the current support at 1,719.02 and the 25-day EMA at 1,755.92 will be worth watching. Indeed, I expect the range’s upper border to be critical resistance zone in the current week.
A pullback from its current support level will likely give the bears an opportunity to retest the psychological level of 1,700. Even so, I am of the opinion that gold price has found its short-term bottom at last week’s low of 1,682.13.
