Gold Index Touches Fresh Lows After Fed’s Decision

The Gold Index is eroding support at $1,900 on a 9% reversal from $2,065 highs. Gold’s spikes down to $1,894 lows after Fed’s rate hike. Muted reaction after the Federal Reserve confirms market expectations.

Gold futures have spiked down to fresh two-week lows at $1,894 per troy ounce on Wednesday following the Federal Reserve’s decision to hike interest rates by 25 basis points to 0.50%.

The precious metal has been practically unaffected after the US Central Bank met market expectations, raising interest rates for the first time since 2018 and hinting towards more hikes over the coming months.

The Fed’s committee has agreed to increase borrowing costs, forced by the highest inflation in the last four decades and with rather gloomy perspectives, as Ukraine’s invasion is likely to increase inflationary pressures and may derail economic growth.

Beyond that, fed chair Jerome Powell has signaled a total of seven rate hikes in 2022 and has committed to set the plan to begin reducing its $9 trillion balance sheet over the coming meeting.

The yellow metal is now pushing against the support area at $1,900 following a nearly 9% sell-off from early-March highs beyond $2,000.

On the downside, a successful break below $1,900, would increase bearish pressure towards $1,875 (February 24 low) and 1,844 (February 15 low). On the contrary, any bullish reaction should extend past $1,927 intra-day high before aiming to $1,0960 (March 11 lows) ahead of the $2,000 psychological level.