Daily Price Outlook
Gold is up by +0.31% on Thursday at $2042.80. Gold reached its one year highest level at $2062 on the back of weak US dollar and declining 10-year treasury yield. The extended recent gains in Gold prices and the weak USD was due to latest Federal Reserve’s rate hike decision.
On May 3rd, the Central Bank of the United States increased the interest rate for 10th consecutive time. This time the rate was increased with 0.25 basis points, as expected by the market. However, the Chairman Jerome Powell raised concerns in market with a statement that future rate hikes will be based on data driven approach due to worsened economic conditions.
The rising pressure on the banking industry of the US is likely to tighten the credit conditions as bank expects a slow economic growth ahead. This situation increased the safe-haven demand in the market and added strength to the yellow metal. The safe-haven bets were already present in the market from the start of this week after the collapse of First Republic Bank, which prompted the fears of US Banking crisis.
The US Dollar Index (DXY) which measures the value of greenback against the basket of six major currencies is down by -0.21% at 101.14. Meanwhile, the US Treasury Yields on 10-year bonds were also declining with -1.27% losses at 3.360. This helped yellow metal as they have negative correlation with the precious gold.
In short, gold is gaining bullish bets on the back of paused fed rate hikes combined with the potential US recession.
Daily Technical Levels
Pivot Points: 2034.33
GOLD – Technical Outlook
The precious metal gold experienced a substantial uptrend, reaching a high of $2,067, largely driven by the US Federal Reserve's interest rate hike from 5% to 5.25%. Typically, the US dollar has a negative correlation with gold when the Federal Reserve raises interest rates, as it strengthens the US dollar. As a result, gold prices tend to decline when the US dollar strengthens.
However, in this specific case, the 5.25% rate hike was already anticipated and priced in, meaning investors were well aware that the rate hike would trigger a downtrend in gold. Consequently, they held a bearish stance on the precious metal. However, once the rate hike was announced, investors began purchasing gold.
Currently, gold is facing resistance, and below this level, it has the potential to drop towards an immediate support level of $2,030 or $2,025.
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.