Gold Price Prediction – Gold prices slid in the wake of Fed minutes

Key Insights

• Gold prices edged lower despite heightened inflation concerns. 
• The Fed meeting signaled more aggressive rate hikes.
• Treasury yields traded flat as the dollar rose. 

Gold prices hold steady due to weaker economic data, rising inflation, and Fed remarks in line with expectations. Fed minutes indicated additional 50-basis point rate hikes in the June and July meetings, which might underpin a stronger dollar.

The rally in equities gives gold a downside bias. The dollar remains at its one-month low amid slowing economic growth. Benchmark yields remained little changed today in the wake of key economic data. The ten-year yield edged slightly lower as investors continued to digest the latest news

First quarter GDP fell by a rate of 1.5%, worse than the expected decline of the 1.3%. The pullback in GDP is the worst it has been since quarter 2 of 2020, which was during the peak of the pandemic. A stronger pullback in the economy than economists’ expected is in the cards. 

Private inventory and residential investment were revised to the downside, which offset the rise in consumer spending by 3.1%. Economists expect an improved reading in Q2, as geopolitical tensions and the omicron variant weighed on economic activity. 

Jobless claims fell by 8,000 to 210,000 from 218,000 during the previous week.

Technical Analysis

Gold prices hold above the 200-day moving average of 1840, trading near the 1850 mark despite downside bias. The dip on the week may give bullish traders a chance to buy the dip as inflation is still lingering and slower economic growth is a concern, which could offset Fed rate tightening that could reverse bias.

Support is seen near the 200-day moving average near 1837. Resistance is seen near the 50-day moving average near 1903 level.

Short-term momentum turned negative as the Fast Stochastic generated a crossover sell signal. Prices are no longer oversold as the fast stochastic prints a reading of 63.03, headed for the overbought trigger level of 80. 

Medium-term momentum turns positive as the MACD might generate a crossover buy signal. This occurs as the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the MACD line.

The  MACD (moving average convergence divergence) histogram has a negative trajectory that points to lower prices.