Gold slid to a one-week low on Thursday as US dollar and Treasury yields rose after Federal Reserve Chairman Jerome Powell signaled a rate hike in March. Spot gold was down 0.60% at $1,808 as of press time today, after falling around 1.6% in the previous session. U.S. gold futures were down 1.02% at $1,811. Analysts’ market comments and forecasts after the Fed decision cryptocoin.com compiled for our readers.
“The economic outlook presented by the Fed is much more important for the gold market”
Commerzbank commodities analyst Carsten Fritsch says the reaction was normal as Chairman Jerome Powell highlighted the strength of the economy and its determination to fight inflation. Jerome Powell displayed a hawkish tone on Wednesday, marking a rate hike in March. This brought the US Benchmark 10-year yields closer to one-week highs, while pushing the dollar index (DXY) to its highest level in more than a month. Carsten Fritsch comments:
Over the past few days, gold has bolstered its safe-haven status, taking advantage of equity market weakness. However, after the Fed’s statements, both gold and stocks were sold, which means that the economic outlook presented by the Fed is much more important for the gold market.
Ole Hansen: Gold can be promoted as a hedge
The gold price is down nearly 2.5% since hitting a 10-week high on Tuesday. “The market is only pricing in the risk of faster rate hikes right now,” Saxo Bank analyst Ole Hansen comments.
But at the same time, faster rate hikes potentially lead to a slowing economic outlook, and inflation isn’t coming down anytime soon. Against some of these developments, gold can be backed as a hedge.
Jerome Powell, at a press conference following the release of the Fed’s latest policy statement, said officials were “determined” to raise interest rates at the meeting to be held on March 15-16. Tai Wong, a New York-based independent precious metals trader, evaluates the Fed Chairman’s speech as follows:
Powell’s hawk comments, which practically guaranteed a rate hike in March, emphasized the strength of the economy, and stated that the Fed’s balance sheet was too large and needed to be scaled down, triggered the dollar and bond sales, causing gold to return to its recent lows.
“Gold price remains supported around $1,800”
Open interest fell by nearly 17.8k contracts after two consecutive days of gains on Wednesday, according to CME Group’s advanced figures for gold futures markets. Instead, volume remained volatile, with approximately 158.7k contracts rising, offsetting the previous pullback.
According to market analyst Pablo Piovano, the sharp selling in Wednesday’s gold was behind the lower open interest rate, an indication that a deeper pullback could be missed in the very near term. However, the analyst states that the significant increase in volume allows for the continuation of the downside that is expected to meet the solid support found around $1,800.
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