Gold prices fell to their lowest level in a week. Profit taking and Fed policy signals were effective in this. Federal Reserve minutes showed officials were in no rush to cut interest rates. He also revealed that he has doubts about the impact of higher interest rates on inflation. Despite the strong physical demand for gold, it is possible that high prices will deter buyers.
Gold falls after Fed Minutes
Gold prices fell to their lowest level in a week on Thursday. Thus, it recorded a decline for the third consecutive session. The drop followed the release of minutes from the Fed’s latest meeting, which indicated interest rates were expected to remain high for an extended period of time.
Fed Minutes reveal officials are in no rush to cut interest rates. Some members even questioned whether current high interest rates were enough to prevent inflation. The minutes reflected a lack of confidence that the Fed would cut interest rates more than once in 2024. Meanwhile, investors’ net long positions in gold have approached the highest level in the last three years. It remains a matter of curiosity how this will change after the Fed’s stance.
Disinflation expectations and market reactions
Although they acknowledged some uncertainty, Fed officials maintained their expectations that inflation would eventually return to the 2% target. They emphasized that the decline in inflation may last longer than previously anticipated. The policy response includes keeping the Fed’s benchmark interest rate in the 5.25%-5.50% range for now. However, officials have expressed willingness to tighten further if inflation risks materialize.
Following the release of the minutes, US Treasury bond yields rose. Additionally, investors have scaled back their bets that the Fed will cut interest rates significantly this year. The minutes pointed to an emerging debate over the actual tightness of current monetary policy, a key factor in determining how quickly inflation can be brought down to the 2% target. Since then, some Fed officials have ruled out a rate cut anytime soon. Authorities foresee a stable interest rate environment at least until September.
Physical demand for gold
Physical demand for gold has remained strong since 2021. However, higher prices are likely to deter discretionary purchases. cryptokoin.comAs you follow from , gold prices increased by 14.5% this year due to the increase from March to May. High prices in India, the world’s second-largest gold consumer, could lead to a nearly 20% drop in imports by 2024 as consumers opt to replace their old jewelry rather than buying new products, experts say.
Gold price forecast: Bearish outlook prevails!
Market analyst James Hyerczyk evaluates the technical outlook and market environment of gold. Given the Fed’s stance on maintaining higher interest rates for an extended period of time and the resulting profit-taking in the gold market, the short-term outlook for gold prices appears bearish. Investors should be prepared for possible additional declines as the market adjusts to the Fed’s policy signals and ongoing uncertainty regarding inflation control.
The gold price fell for the third session on Thursday. However, it is still in correction mode as all three key trends are still upward. The short-term range is $2,277.34 to $2,450.13. The market is currently trading on the strong side of the 50% level at $2,306.85. How traders react to this level will likely set the tone for the day. A sustained move above $2,306.85 would indicate that there are still enough traders buying the dip. If $2,306.85 does not hold, we are likely to see further declines with the upward 50-day moving average at $2,306.86 being the next downside target. Because, this indicator checks the intermediate trend.
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