Gold’s bears advance to test a crucial support

Following price movement in both directions, the price of gold is currently consolidating. The motivating force is the Fed’s outlook, which has an eye on crucial support.


As the US Dollar strengthens once more, the price of gold is down about 0.5% on the day and has fallen below the $2,000 level. With markets now pricing in an 85% chance of a 25-basis-point rate hike at the Federal Reserve’s May 2-3 meeting, US Treasury rates are increasing and heading for a one-month high.

Following initially Friday’s remarks from Federal Reserve Governor Christopher Waller who claimed that despite a year of aggressive rate increases, the Fed hasn’t made much progress in getting inflation back to their 2% target and argued that rates still need to go up, hawkish tones have gradually returned this week.

James Bullard, the president of the St. Louis Federal Reserve, told the market on Tuesday that the Fed should keep raising interest rates because recent data suggest that inflation is still persistent while the overall economy appears set to continue expanding, albeit slowly. Additionally, there have been a number of statistics, such as strong consumer spending for the most recent quarter and an increase in company activity in New York State in April.

Consequently, the US dollar rose from a low of 101.656 and was reaching a high of 102.228, making the greenback bullion less attractive to overseas buyers as higher rates blunt non-yielding bullion’s appeal.

Prior to the Federal Reserve’s meeting on May 2-3, a blackout period will begin on April 22. WIRP predicts 90% probability of a 25 bp raise on May 3, according to analysts at Brown Brothers Harriman, up from 70% at the beginning of last week and 50% at the beginning of the week before. After that, there is a 20% chance of a walk on June 14. What’s more, a rate cut by year’s end is no longer anticipated.

Analysts observe that gold is flirting with key trigger levels that could spark the next round of massive algo liquidations, in accordance with their assessment of increased risks of a tactical retreat, as the broad US Dollar pushes higher. With even more significant liquidations anticipated below the $1,945 area, a breach below the $1,975 zone should cause CTAs to lose -4% of their maximum stake in the yellow metal.

Bears guarding $2,000 moved in, and an ensuing decline into crucial support was successful. From there, the price was categorically rejected, and a consolidation phase may be imminent.