Hawkish Fed Shifts Blunts Gold Rally
Gold Rally Capped for Now
Gold prices are caught between two opposing drivers currently. On the one hand, news of the US/Iran peace deal is feeding into bullish gold sentiment via lower oil prices. However, the initial downside impact on USD from news of the deal (which was helping support gold also) has faded on the back of the hawkish FOMC meeting yesterday. DXY was seen jumping above the $100 level as Fed policymakers turned more firmly hawkish. Nine of the eighteen members now forecast at least one hike this year, up from zero in March, with five members projecting two hikes. Market pricing for a Fed hike by year end has now jumped accordingly, sitting above 80% from below 60% prior to the meeting.
US/Iran Deal Signing
With USD spiking higher, the peace-deal rally in gold has stalled for now and consolidation looks likely while traders await further news. Tomorrow, the US and Iran are set to sign off on the initial deal in Switzerland, ushering in a 60-day negotiations window for the fuller deal terms. It could be that we see a fresh rally in risk assets on the back of the deal being signed, which could see some fresh upside in gold. However, if the focus stays with the hawkish Fed shift, this could complicate things near-term.
Technical Views
Gold
The rally in gold off the 4,092.60 level has stalled for now into the retest of the broken bull trend line and the 4,389.24 level. There is potentially a head and shoulders patten at play here if we break back below 4,092.60. In that scenario, 3,898.03 will be the next bear target to note. If we break higher, 4,558.62 is the next resistance to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.