- Gold stays under pressure, tests 50-day SMA as rate decisions awaited
- Rising inflation risks from higher oil prices push up Fed rate hike bets
- US 10-year yield hits 5% in major headwind for gold
- But easing bearish momentum signals possible rebound if Fed disappoints
continues to edge lower, breaking below the $4,300 mark to reach its 50-day simple moving average (SMA) at $4,275, as downside risks persist. Whether the 50-day SMA can defend the bulls will be vital in determining the next direction, which will likely be set by Wednesday’s interest rate decision by the US Federal Reserve.
Meetings by the Bank of England and Bank of Japan on Thursday and Friday, respectively, run a high risk of acting as additional bearish catalysts if both central banks follow the with any hawkish rhetoric. The Fed is widely anticipated to raise its benchmark rate by 25 basis points tomorrow, in a sharp reversal of expectations after a trio of stronger-than-expected data releases – the , and reports – sealed the move.
A fresh rally in has also contributed to the repricing in interest rate expectations, not just for the Fed but for other central banks too. More importantly, the Trump administration does not seem to be working hard enough to reach a new ceasefire agreement with Iran. Half-hearted attempts such as getting Ukraine and Russia to stop targeting each other’s energy facilities are not seen as being sufficient to ease the jump in fuel prices. Markets have also stopped paying much attention to Trump’s running commentary – the latest saying that an end to the war “will not be long”.
In the current environment, there’s few upside risks for gold, particularly as the is now back above 5.0% and the surge is showing no sign of stopping amid growing concerns over inflation. If the 50-day SMA is breached, the next target for the bears will be the $4,200 level, followed by $4,100. A drop below $4,100 would expose June’s eight-month low of $3,942, putting the yellow metal back on its long-term downtrend path.
However, if the Fed surprises by not raising rates tomorrow, or a hike is not accompanied by a convincingly hawkish tone, gold could bounce higher, initially targeting $4,400. A break above $4,400 would shift the focus to the 200-day SMA at $4,539 before the bulls re-test the August peak just below $4,700.
The technical indicators suggest a bullish reversal cannot be ruled out, as both the stochastics and MACD have started to flatline, pointing to stalling negative momentum ahead of the week’s big events.
