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Asset Watch

Gold prices brace for the FOMC rate decision

 

Wednesday, June 14, 2023

Gold Prices, Chart and Analysis

• Markets expectations from the FOMC meeting

• Gold prices corrects lower, key technical levels to consider

 

Markets await the US Central Bank rate decision at 10:00PM UAE time. Investors, expect the FOMC to hold interest rate unchanged at 5.25% for the following reasons:

• The Fed Chair hinted that he would prefer to wait to evaluate the impact of previous rate hikes on the economy especially, after raising 500 basis points in the last 15 months. It is worth noting that it could take up to 12 months or more of the monetary policy change to appear clearly on the economic data.

• The cooler inflation data of May released yesterday at 4% YoY, supports the case of skipping the rate hike in this meeting.

 

That said, if the Fed chooses to go against expectations and hike rates by 25 bp, this could affect the greenback price positively and commodities prices such as gold negatively.

 

Investors will be waiting the Fed’s dot plot which shows where the FOMC members see the US interest rates could be heading in the short and long terms. Additionally, the US central bank will publish its economic projections about inflation, growth and unemployment levels in the coming years, and regardless of these projections and the rate decision investors will tune in to the Fed chair press conference coming at 10:30 pm UAE time, to get more clarity about the US monetary policy.

Gold Daily Price Chart

 

Chart source: TradingView

 

In mid-May, the gold price closed below the 50-day simple moving average, indicating to a weaker bullish momentum. The price corrected lower and started a trendless move creating a lower high with a higher low.

Currently, the price moves within the trading area 1902-1949, and could be heading for a test of low end of the mentioned trading area. However, the support levels located at 1933 and 1911 should be kept in focus.

On the other hand, a daily close above the high end of the trading area could encourage bulls to rally the price towards 1981. Nonetheless, the resistance levels located at 1959 and 1974 should be watched closely.


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