Gold Gains Ground Despite Fed Rate Hike

Key Insights

• The Fed was less hawkish than expected, providing significant support to gold markets. 
• Gold mining stocks continue to rebound at a robust pace. 
• A move above $1900 will push gold towards the resistance level at $1915.

Gold Stays Strong After Fed Interest Rate Decision

Gold is trying to settle above the $1900 level as traders focus on new interest rate projections after yesterday’s Fed Interest Rate Decision.

The Fed raised the interest rate from 0.5% to 1.0% and announced that it would start reducing the size of its balance sheet in June. At the same time, comments of the Fed Chair Jerome Powell were less hawkish than expected, and traders quickly adjusted their interest rate forecasts.

Currently, the market expects that the interest rate will be raised to 1.25% on June 15. Previously, traders were ready for a 1.75% rate, so the change in expectations was dramatic. Not surprisingly, such a change provided significant support to gold markets, which are sensitive to interest rate expectations.

VanEck Gold Miners ETF continued to rebound and settled above $35.50. The nearest significant resistance level for VanEck Gold Miners ETF is located at $36.00. In case GDX manages to settle above this level, it will gain additional upside momentum.

Technical Analysis

Gold is testing the resistance level at $1900. In case this test is successful, gold will move towards the next resistance, which is located at the 50 EMA at $1915.

A move above the 50 EMA will open the way to the test of the resistance at $1925. In case gold manages to settle above this level, it will head towards the next resistance at $1935.

On the support side, the previous resistance level at $1890 will serve as the first support level for gold. If gold settles back below this level, it will head towards the next support at $1880. A successful test of this level will push gold towards the support at $1865.

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