Gold price: relief from Treasury yields is likely short-lived

gold price

Gold price dropped further from the crucial level of $1,800 an ounce on Thursday as the markets digested the Fed’s hawkish stance.  Even so, the easing of the US dollar and Treasury yields has given the precious metal some relief.

Fundamentals

 In a press conference held after the release of the Fed interest rate decision, the central bank’s Chair, Jerome Powell stated, “our focus right now is really on moving our policy stance to one that is restrictive enough to ensure a return of inflation to our 2% goals over time. It’s not on rate cuts”.

On Tuesday, gold price had rallied to a six-month high of $1,825.01 after the US CPI numbers came in lower-than-expected. As the data signalled the peaking of the persistently high inflation, traders expected the Fed to be somewhat dovish in its interest rate decision on Wednesday. While the central bank approved the largely expected rate hike of 50 basis points, it projected at least one other super-sized increase of 75 basis points by the end of 2023.

Seeing that no interest rate cuts in the coming year are priced in at the moment, gold price will likely remain under pressure. However, in the immediate term, the easing of US bond yields and the US dollar are boosting the precious metal. A decline in Treasury yields lower the opportunity cost of holding the non-yielding bullion.

Gold price prediction

On Tuesday, gold price had rallied past the resistance level of 1,820 to hit a 6-month high at 1,825.01. However, in reaction to the Fed interest rate decision, the precious metal has since dropped below the psychologically crucial level of 1,800. As at the time of writing, it was at 1,776.54; down by 1.66%.

As seen on its daily chart, gold price remained above the 25 and 50-day exponential moving averages. Based on both the fundamentals and technicals, I expect the precious metal to continue trading below 1,820.40 in the short term.

In fact, 1,790 will be a resistance level worth watching in the ensuing sessions. On the lower side, 1,765 and 1,741.16 will be support levels worth watching.

gold price
gold price

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