Gold Prices fell from new all-time highs near $2,220 early in the US session on Thursday on a sharp rise in US dollar and US Treasury yields.
- Gold prices have fallen sharply due to the rise in the US dollar and bond yields.
- The Federal Reserve is sticking to its projections of three rate cuts this year.
- An improving US economic outlook allows the US dollar to recover.
Gold (XAU/USD) prices fell from new all-time highs near $2,220 early in the US session on Thursday on a sharp rise in US dollar and US Treasury yields. The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, hit 103.50 following the decline seen following the release of the Federal Reserve (Fed) dot chart. Revised forecasts for gross domestic product (GDP) and core annual personal consumption expenditure (PCE) price index for 2024 appear to have limited the US dollar’s decline. The improving economic outlook for the United States bodes well for the US dollar. US 10-year Treasury yields hit 4.27% as the Federal Reserve avoided providing a concrete timing for a rate cut.
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Earlier, the quarterly update dot chart from the March monetary policy meeting showed that estimates of three rate cuts remain on the table for this year, following which speculation intensified on expectations of a rate cut. the Fed for June, which led to gold prices. -high time. Comments from Federal Reserve Chairman Jerome Powell also helped strengthen demand for gold. Powell said policymakers remain confident that core inflation is slowing despite February’s inflation data. Strong expectations that the Federal Reserve will lower interest rates reduce the opportunity cost of holding investments in unprofitable assets like gold.
Daily Digest Market Movers: Gold Prices Fall on Sharp Rise in US Yields
- Gold prices fell sharply after hitting an all-time high of $2,223, as the US dollar rebounded from a five-day low of $103.17.
- Demand for gold has increased largely because the Federal Reserve has signaled that inflation is moving in the right direction. The Federal Reserve is confident that underlying price pressures are easing even as inflation held steady in the first two months of this year. Fed officials estimate the annual underlying PCE price index will be 2.6% in 2024, up from 2.4% estimated at the December policy meeting.
- The Fed’s updated dot plot indicated that its December projections of three rate cuts in 2024 remain on track. Nine of 19 policymakers support cutting interest rates three times this year, while one anticipates cutting interest rates more than three times. The rest of the authorities had anticipated two or fewer rate cuts during the same period.
- This has raised expectations that the Federal Reserve will cut interest rates at its June policy meeting. According to the CME FedWatch tool, the likelihood of a rate cut being announced in June stands at over 74%, marking a notable increase from the 59% probability noted prior to the Federal Reserve meeting. Despite maintaining its projection to reduce interest rates three times this year, the Federal Reserve has seen a rise in average rate forecasts for 2025 and 2026 to 2.9% and 3.1% respectively. Furthermore, the average estimate for long-term rates has climbed to 2.6%.
- Regarding the US economic outlook, the Federal Reserve forecasts an unemployment rate of 4.0% by 2024, up from 4.1% projected in December. Meanwhile, the gross domestic product (GDP) forecast for 2024 was raised to 2.1% from 1.4% estimated in December.
Technical Analysis: Gold Price Falls from New All-Time High Near $2,220
The price of gold has fallen from an all-time high of $2,220 to below $2,180. Short-term demand for gold price is extremely bullish as the 20-day EMA at $2,137 is sloping vertically upwards.
Gold price is trading in uncharted territory, but may face resistance near the 161.8% Fibonacci extension level at $2,250. The Fibonacci tool plots from the December 4 high of $2,144.48 to the December 13.