The strong US dollar’s momentum from the Federal Reserve’s announcement yesterday contributed to the evaporation of the first rebound gains for gold XAU/USD. This is after the announcement around the resistance level of $ 1670 an ounce, as the gold price plunged strongly after Bank Governor Jerome Powell confirmed that he is determined to continue raising US interest rates. This will reach its goal to contain the record US inflation. Accordingly, the price of gold fell towards the support level of $ 1634 per ounce at the time of writing the analysis.
Ahead of the announcement, a note from Citi said: “We do not expect a cautious ‘pivot’ from the Fed.” Economists at the US Bank say that the persistently strong demand in the economy is facing already tight labor markets. If this is true, the price of gold may be on the way to falling sharply again.
The US dollar fell in late October as markets felt that the Fed was ready to confirm that the time to exit its rate hike policy was approaching. It was this rapid rise in US interest rates compared to elsewhere that drove the US dollar to outperform in 2022, so ending the policy could spell the end of the rally. “The first two weeks of November will be pivotal for the US dollar’s near-term trajectory, as it will likely determine the timing of a slowdown in the Fed’s lifting cycle,” said Simon Harvey, head of FX analysis at Monex Europe.
As for the markets, the 75 basis point rise today was no surprise. Any major moves in global currency markets will likely stem from the intended or unintended guidance provided by Federal Reserve Chairman Jerome Powell. The US dollar had fallen in late November as expectations increased that this meeting would see Powell signal that the time to ease up on rate hikes is now approaching as the economy was finally reacting to previous highs and was slowing. US Citi economists now expect that any slowdown in the pace of rate hikes will have to be matched by “guidance that the Fed may raise for a longer period and to a higher final rate”. If Citi is right, the dollar could rise, reversing some of the recent gains in the price of gold.
There is no doubt that the continuation of the US dollar’s gains will move the XAU/USD gold price towards stronger bearish levels. I see it as an opportunity to monitor and capture the buying levels, and the most important for it will now be 1626 and 1610 dollars, respectively.On the other hand, according to the performance on the daily chart, and as I mentioned before, a move above the $1,665 resistance will be important for the bulls to gain more control over the trend.I still prefer buying gold from every bearish level.
The price of gold may remain moving in narrow ranges until the markets react to the announcement of the US jobs numbers tomorrow, which will have importance for the path of the dollar’s closing.
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