Will Hawkish Fed Comments Put Pressure on Gold ?

Will Hawkish FED Comments Put pressure on gold?

Gold prices had an indecisive trade yesterday, as traders stayed sideline ahead Jackson Hole Symposium, although signs of weakening growth kept gold above key levels.

Yellow metals struggled to cross their previous week’s high with the prospect of higher U.S. interest rates and a strong dollar which stood at an over two-month high putting pressure on the higher side. While Treasury yields increased once more to levels not seen in decades.

According to two Federal Reserve officials, the recent increase in bond yields helped further cool the U.S. economy and out-of-control inflation. They therefore backed it.

Jackson Hole, Powell’s speech will give direction for the near future.

Today, the entire market will react strongly to comments by Federal Reserve Chair Jerome Powell at Jackson Hole

Given that U.S. inflation remains sticky and recent data showed ongoing growth in the labour market, investors were mostly on alert due to expected hawkish signals from the Fed chair. Even when other indicators indicated a slowdown in U.S. economic activity, investors still anticipate the Fed chair to predict higher U.S. rates for a longer period of time, which is not good for gold.

Further, several central bankers, finance ministers, academics and financial market experts from around the world attended the event. Comments and speeches from central bankers and other influential officials will cross the wires throughout the day, keeping volatility high.

Technical Outlook

Gold prices turned neutral in the morning, prices trading at 58787 against the previous day’s close of 58811.00.

Since 18 August 2023, prices have enjoyed a recovery rally. It recovered from the low of 58281 and made a high of 58818.00.

As per our report released on 18 August, prices hit both levels 58650-58750.00. 

On the above chart, prices are struggling to cross their massive resistance of 58950, coinciding with 50 SMA. The formation of a doji candlestick indicates an indecisive trade. However, the momentum indicator RSI is still in positive territory.

It’s expected that rather than technical aspects, Central bankers’ comments will drive Gold prices in the near future. Any hits for a rate hike may put pressure on the prices, while a pause of the rate hike cycle will lead to some buying activities in the prices.

On the upside, a break above 58950 appears to set a bullish rally towards 59500-59850.00. Alternatively, prices may take a dip towards 58350-57950 very soon.