Gold Plunges on Hawkish Fed Details
Gold Heavily Sold
Gold prices are plunging today as the safe-haven metal continues to fall from favour amidst the current investor climate. The Iran war, which ahs seen energy prices soaring, is fuelling a hawkish repricing in traders’ central bank expectations. As a result, USD has remained the preferred candidate for safe-haven flows during the conflict, tracking oil prices higher. Against this backdrop, traders have been dumping long positions in gold, expecting that central banks will be forced to step back from the easing programs signalled at the start of the year with many players anticipating that hikes will be brought into discussion if the conflict (and elevated energy prices) remain through coming months.
Hawkish Fed Shift
Yesterday, the Fed held rates steady while warning of a lot of uncertainty in the outlook as a result of the war. While the bank still forecasts one cut this year, the majority of members no longer see a second cut as likely (earlier projections were for two cuts this year). With inflation and growth forecasts lifted, gold traders have been highly sensitive to this hawkish shift. As such, while the Iran war continues and energy prices remain elevated, USD is vulnerable to further upside, endorsed by hawkish Fed risks, with gold prices to remain pressured accordingly.
Technical Views
XAUUSD
The sell off in gold has seen the market breaking own heavily below the 5,113.51 level with price now testing below the bull channel lows. Momentum studies are firmly bearish here, turning focus to a test of the 4,548.82-4,389.24 support region next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.