Gold price: Uncertainty on the direction of interest rates curbs gains

Gold price edged lower on Wednesday to a level last recorded over two weeks ago. Tapered expectations of a more dovish Federal Reserve and the subsequent rebound in Treasury yields have been weighing on the asset in recent sessions.

What’s driving the market?

On the one hand, bulls remain in control of the gold market amid the persistent fears over the slowing down of the US and global economies. This explains why the crucial level of $1,950 has continued to offer support to the asset for about a month now.

Even so, uncertainty over the direction of the US interest rate continue to curb gold price gains.  In addition to hawkish comments by some Fed officials, recent economic data have pointed to further rate increases by the central bank.

The US economy has showed resilience, an aspect that shows Fed may have more room for its aggressive monetary policy. As a result, Treasury yields rose to a four-week high on Wednesday; exerting pressure on the non-yielding bullion.    

Gold price prediction

Gold price has risen by close to 10% over the past six weeks. In fact, about a week ago, it rallied to a level last recorded a year ago. However, in recent sessions, tapered expectations that the Fed will halt or even cut on its aggressive interest rate hikes has eased on its rally.

It has been in the red for three out of the past four sessions. The decline has seen the precious metal drop below the psychologically crucial level of 2,000. As at the time of writing, it was down by 1% at 1,985.44.

Even with the pullback, the bulls are still in control. Indeed, gold price continues to trade above the 25 and 50-day EMAs. In the short term, I expect the asset to continue finding support along the 25-day EMA at 1,977.87.

However, heightened bets for further rate hikes by the Fed may give the bears an opportunity to retest the lower zone of 1,950. On the upside, 2,015 will remain a resistance level worth watching.

gold price
gold price

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