Gold Price Retreats About 1% on Fed’s Apparently Hawkish Stance

Improved global risk sentiment and a decline in US Treasury yields have caused gold prices to retreat from daily highs, further pressuring the US dollar. The precious metal is down 0.93%, at $2360.60 per ounce.

Although US Federal Reserve officials have been hawkish, there has been a bullish momentum. The US Treasury bond yields declined, weakening the US dollar and containing the decline in gold prices.

Israel’s decision to hold off on attacking Iran has reduced tensions in the Middle East. Meanwhile, White House National Security Advisor Jake Sullivan says the US will be placing fresh sanctions on Iran in the coming days. Although the US economy has done well, Fed Chair Jerome Powell pointed out that recent data indicates that inflation has not increased. He advocated letting restrictive policies take their course and letting data and the changing perspective determine gold prices in the future.

Recent US economic data shows a strong economy, with consistent industrial production numbers and retail sales in February that above forecasts. The odds of a quarter of a percentage point reduction are 71%, according to the CME FedWatch Tool, which indicates that the first rate decrease may occur in September. Market players, however, appear to be more concerned with geopolitical risks given that Israel is supposedly completing preparations for a counterattack against Iran.

The US economy is predicted to increase by 2.9% in Q1 2024, up from 2.8% predicted on April 15, according to GDP forecasts. The US Dollar Index (DXY) falls by 0.15% to 105.96. Despite retreating towards the $2,370 zone, gold’s daily chart indicates an upward tilt. Tuesday’s Doji pattern points to a lack of buying enthusiasm that might sustain the precious metal’s advances, potentially leading to a retreat.

XAU/USD is headed for a correction, with the first support being the $2,350 mark, followed by the April 15 daily low of $2,324. If surpassed, Gold might test $2,300.