Gold Declines As Traders Focus On Fed

Key Insights

• Markets prepare for aggressive rate hikes from the Fed, which is bearish for gold. 
• The U.S. dollar moves to new highs against a broad basket of currencies. 
• A move below the support at $1915 will push gold towards the next support level at $1900.

Gold Remains Under Pressure At The Start Of The Week

Gold is currently trying to settle below the support level at $1915, while the U.S. dollar is testing new highs against a broad basket of currencies.

Markets are focused on the future trajectory of Fed’s rate hikes. Currently, markets are pricing in a 95.4% probability of a 50 basis points (bps) rate hike on May 4, when the Fed will announce its interest rate decision. Markets also believe that the target rate would be raised by as much as 75 bps on June 15, followed by a 50 bps rate hike on July 27.

Not surprisingly, gold markets have found themselves under pressure as the Fed is expected to aggressively fight inflation. VanEck Gold Miners ETF settled below the 50 EMA at $37.30 on Friday, and this pullback would be continued today as gold markets remain under material pressure.

Technical Analysis

Gold is testing the support level at $1915. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

In case gold manages to settle below the support at $1915, it will head towards the next support level, which is located at $1900. A move below this level will open the way to the test of the support at $1890. If gold declines below the support at $1890, it will get to the test of the next support at $1880.

On the upside, the previous support at the 50 EMA at $1925 will serve as the first resistance level for gold. In case gold manages to settle back above this level, it will head towards the resistance at $1935. A successful test of the resistance at $1935 will push gold towards the resistance at the 20 EMA at $1945.

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