HFM information and reviews
HFM
96%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FXCM information and reviews
FXCM
87%

Precious traders await Fed decision


27 July 2022

Turmoil ensues in the global financial scene with rampant inflation, amplified recession fears and wide-reaching geopolitical risks, have investors scramble to reassess the future prospects of the shiny metal. Not only that, but the declaration of monkeypox as a global health emergency from WHO, stirred the waters even more and raised the inevitable question of how governments might respond towards this new threat and what implications will it have on the grander scheme of things. Having said that, in this report we aim to shed light on the current and upcoming events that are of crucial importance for the future development of the precious, as well as a technical analysis of assessing its potential short-to-medium horizon.

Gold’s price has been confined in a sideways price action for the past few sessions, slightly above the $1,700 range, possibly showcasing an absence of conviction on where it might lead to next. Traders brace themselves for tomorrows’ scheduled Fed’s interest rate hike decision and the follow-up speech by Chairman Jerome Powell, awaiting in anticipation on whether the hike will meet the 75-basis point consensus or will there be an upshot surprise of 100 basis points hike.

Should the rate match the expectation we might see a rather small yet supporting reaction towards the greenback as the decision is already mostly priced in and could in turn weigh slightly on the precious. However, should the Fed’ opt for an even more aggressive hike and take the market by surprise, then we might see the dollar get a substantial boost and as consequence observe the precious retract, becoming more expensive and thus unattractive for international investors. The aggressive rate hike stance by the Fed, comes after the four-decade high of the consumer price index rate, released in June, exacerbating fears that inflation will take a toll on the consumer front and become entrenched in the economy for longer. On the flip side, should the Fed opt in for the more aggressive monetary policy tightening option in the following months, we might also see the probability of the US economy entering a recession increase to 40%, according to Reuters, thus the chances for a “soft-landing” dwindle drastically in our opinion. Another factor that might impact the shiny metal’s future outlook are the bond yields.

Even though gold is considered a safe haven and a hedge against inflation, it could fall out of favor when contrasted with the US treasuries as, the precious bears no-yields. Bond yields however, and the US 10 year in particular, has been declining for the past few sessions which could provide support for gold making it a viable option for investors’ portfolios, thus increasing the demand for bullion.

Finally, we also note the upcoming financial releases for the US, namely the GDP rate figure for Q2 to be released on Thursday the 28th of July alongside with the Initial jobless claims figure for last week and on Friday the 29th of July, the Consumption rate for June and the University of Michigan’s final market sentiment report for July, all being of material importance for the dollar and as a consequence for gold’s price.

Technical Analysis

Looking at the XAUUSD 4H chart we can observe the descendingtrendline initiated on the 13th of June, which highlights the lowerpeaks and lowertroughs of the precious. However, we also observe the stalling and the confinement of the bullion’s price action between the 1716 (S1) support line and the 1736 (R1) resistance line, since the 20th of July, possibly showcasing traders’ indecision towards the shiny metal, ahead of the Fed’s rate decision tomorrow 28th of July.

Precious traders await Fed decision

Thus, we hold a sideways price action bias for gold’s for the time being. Supporting our case, is the RSIindicator below the 4H chart, flatlining on the 50 level and the convergence of the price action with the 20 moving average line of the Bollinger bands.

Should the bulls take over and for us to change our assessment, we would require a clear break of the 1736 (R1) resistance level, the descendingtrendline and a possible challenge of the 1752 (R2) resistance line.

Given though the prementioned downwardtrendline and should the bearsreignover, we may see the break below the 1716 (S1) support level and the move past the 1702 (S2) supportbarrier. While in an extreme bearish scenario we may see golds price approaching the 1682 (S3) support hurdle. Please note that higher than usual volatility may be present for gold’s price at the time of the release of the Feds interest rate decision, hence caution is advised should gold traders be active at that time.

#source

Share: Tweet this or Share on Facebook


Related

Platinum's Ascending Demand and Depleting Reserves: A Golden Opportunity for Traders
Platinum's Ascending Demand and Depleting Reserves: A Golden Opportunity for Traders

When delving into the realm of commodities, the inherent dynamics of supply and demand remain pivotal in dictating price trajectories...

29 Sep 2023

Extended Analysis: The Tumult in Soft Commodities and the Inflationary Maze
Extended Analysis: The Tumult in Soft Commodities and the Inflationary Maze

Soft commodities have inexorably stepped into the spotlight as their soaring prices amplify the labyrinth of global inflation. A spectrum of meteorological adversities and burgeoning...

28 Sep 2023

Continual Dollar Ascendancy: The Underlying Dynamics
Continual Dollar Ascendancy: The Underlying Dynamics

The trajectory of the US dollar is demonstrating an upward momentum, with the dollar index inching closer to the resistance level at 106.00...

28 Sep 2023

Dollar on the Watch: Core PCE Inflation Holds the Key
Dollar on the Watch: Core PCE Inflation Holds the Key

After the Federal Reserve's hawkish stance, all eyes are now on the core Personal Consumption Expenditures (PCE) index, the Fed's preferred gauge of inflation, due to be released on Friday at 12:30 GMT...

26 Sep 2023

AI’s Evolution: Bridging the Real and the Imagined
AI’s Evolution: Bridging the Real and the Imagined

Once merely the musings of speculative fiction, the conception of Artificial Intelligence (AI) autonomously executing tasks and rendering decisions has transformed into tangible reality...

25 Sep 2023

The Fed Rate Decision Bolsters the U.S. Dollar
The Fed Rate Decision Bolsters the U.S. Dollar

The dollar index is currently trading at 105.20. Following the September meeting, the Federal Reserve opted to maintain the rate at 5.5%, aligning with market expectations. In its monetary policy statement...

21 Sep 2023


Editors' Picks

MultiBank Group information and reviews
MultiBank Group
86%
Vantage information and reviews
Vantage
83%
FP Markets information and reviews
FP Markets
81%
Just2Trade information and reviews
Just2Trade
80%
AMarkets information and reviews
AMarkets
78%
IronFX information and reviews
IronFX
77%

© 2006-2023 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.