- Summary:
- Gold prices are heading down fast after FOMC minutes reinforced the belief that the earliest US rate cuts will likely be in September.
Gold price declined further on Thursday as the market reacted to hawkish Fed minutes. Spot gold price was down by 0.60 percent and traded at $2365 per ounce at the time of writing, while futures gold was down by 1.03 percent and went for $2368 at the COMEX. Inclusive of the intraday decline, the yellow metal has lost about 2.5 percent of its value in the three sessions following its all-time high price of $2,450 set on May 20.
The Federal Reserve released minutes of its April 30-May 1 FOMC meeting on Wednesday, with the minutes dashing hopes of a June interest rate cut. A series of soft US economic data and a slowdown in the rate of inflation had raised hopes that a June rate cut was still tenable, after all. However, the minutes pointed to the unanimous belief among FOMC members that the inflation data received during the first four months of the year is inadequate to justify a reduction of the current 5.25%-5.50% interest rate.
Consequently, the market now expects the first rate cut to be announced in September, at the earliest. This hawkish stance by the Fed has raised the pressure on gold, as it strengthens the US dollar against other currencies.
Beyond the Fed, gold lacks safe haven appeal, as the geopolitical temperatures in the Middle East have cooled off in recent days. The International Court of Justice is expected to rule against Israel’s ground offensive into Rafah on Friday, which could have an impact on an operation that has been ongoing since the beginning of May. Furthermore, with gold still above its 21-day MA od $2357.10, profit taking could also bring in more downward pressure on the price.
Technical analysis
The RSI on gold price is currently weak, signaling that the sellers are in control. The downside will likely prevail if resistance persists at the 2373.04 pivot mark, with the first support likely to come at 2360. A continuation of control by the sellers will likely snap the support, potentially sending the price lower to test 2349.52. Conversely, a move above 2373.04 will signal control by the buyers, and the upward momentum will likely encounter the next resistance at 2384.17. Furthermore, extended control by the buyers will breach the resistance and invalidate the downside view. That could also result in more upside momentum to test 2394.47.
