Gold Prices Edge Higher Following Fed Decision

Key Insights

• Gold prices edged higher on Wednesday.
• The Fed Increase Rates by 50-basis points.
• Treasury yields were nearly unchanged.

Gold prices rebounded slightly on Wednesday. The dollar moved sideways in the wake of the Fed decision on Monday policy. ADP private payrolls rose less than expected, but revisions for March were strong.

Higher rates seem to be dampening growth. According to ADP, U.S. Private payrolls increased by just 247,000, well below the 390,000 expected. There was an upwardly revised gain of 479,000 in March. A drop-off in small business hiring was the primary culprit for the disappointment. Big businesses with 500 or more workers compensated for some declines, adding 321,000.

The Federal Reserve increased interest rates by 50-basis points as expected. The current level of Fed Funds rates is now 75-100 basis points. Rate hikes will be ongoing where appropriate. The Fed will begin to reduce its balance sheet on June 1. The move was expected and is considered quantitative tightening.

Technical Analysis

Gold prices rebounded slightly on Wednesday. Support is seen near the 200-day moving average at 1,834. Resistance is seen near the 20-day moving average eat 1,926. The 20-day moving average has crossed below the 50-day moving average, which means a medium-term downtrend is now in place.

Short-term momentum has reversed and turned positive as the Fast Stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic prints a reading of 15 below the oversold trigger level of 20.

Medium-term momentum has turned negative as the MACD generates a crossover sell 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.