Gold Prices Stagnate Ahead of Federal Reserve Decision
Author: Christian Roberts - Photographer / Content Editor
Published: 22 Mar 2023
Last Updated: 27 Mar 2023
Synopsis
This blog offers an overview of the current state of the gold market and key considerations for gold investors. It covers topics such as recent price movements, the impact of events such as the Credit Suisse rescue, and the stabilisation of the US banking system. The blog also discusses the potential impact of the Federal Reserve's forward guidance on gold prices and includes technical analysis and forecasts for the June Comex Gold futures contract. Overall, the blog provides valuable insights and analysis for anyone looking to navigate the complexities of the gold market.
Overview of Gold Prices
The current price of gold is trading within a limited range as investors wait for the Federal Reserve's interest rate decision and policy outlook. While the price of bullion surged up to 10% and reached a one-year high due to safe-haven demand, prices have weakened since the Credit Suisse rescue. Although the US banking system is stabilising, uncertainties remain, and further measures may be necessary.
Impact of Credit Suisse Rescue on Gold Prices
Following the Credit Suisse crisis and the collapse of Silicon Valley Bank, there has been a surge in demand for safe-haven assets, causing gold prices to rise up to 10%, or $180. However, as risk appetite increased after the Credit Suisse rescue, prices have declined. Uncertainties remain in the financial system, and Treasury Secretary Janet Yellen has warned that additional measures may be necessary if smaller institutions experience deposit runs that could lead to contagion.
Focus on Fed Forward Guidance
Investors are currently focused on how the Federal Reserve communicates its forward guidance, as a more hawkish stance to fight inflation could potentially undermine gold prices. Bullion is seen as a hedge against inflation, but it becomes less attractive due to higher opportunity costs when interest rates rise.
Daily June Comex Gold Technical Analysis and Forecast
The daily swing chart shows that the main trend is currently up, with a resumption of the uptrend signaled by a trade through $2031.70, while a move through $1830.20 will change the main trend to down. The minor trend is also up, but a trade through $1906.00 will shift momentum to the downside. The market is currently trading at the weak side of its pivot point of $1968.90, making it a resistance level. The primary downside target is the retracement zone of $1931.00 to $1907.20, with the main range of $1830.20 to $2031.70. Traders will be closely watching for the reaction to the minor pivot point of $1968.90, with a sustained move under this level indicating the presence of sellers and a sustained move over $1968.90 signaling the presence of buyers.
Summary
For gold investors, it's important to keep an eye on various factors that could impact gold prices. The recent rally in gold prices may have weakened, but uncertainties in the financial system remain. The focus now shifts to the Federal Reserve's communication of forward guidance, as a more hawkish stance to fight inflation could undermine gold prices. Traders should closely monitor the daily swing chart for the June Comex Gold futures contract to make informed investment decisions.
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