Gold Prices Reversed after Rallying on Wednesday 

Key Insights

• Gold prices pulled back after yesterday’s rally.
• Fed Chair Powell states that 75-basis point hike is unlikely.
• Treasury yields surge to four-year highs following the FOMC meeting.

Gold prices retreated despite their short-term rally. The dollar recovered after facing steep losses yesterday. Benchmark yields extended gains after the 50-basis point rate hike. The ten-year treasury yield rallied to 3.09% following the FOMC meeting. 

The FOMC hiked rates by 50-basis points at the meeting on Wednesday, but Fed Chair Powell made clear that a 75-basis point move was unlikely at the next meeting.

This caused the dollar to ease, while bond yields extended gains. However, Powell stated that the main goal is to rein in inflation, which gives the dollar and yields greater upside momentum. 

Initial jobless claims rose to 200,000 from the previous 181,000. Productivity fell by 7.5% in the first quarter. However, a tightening labor market will keep inflation elevated.

Technical Analysis

Gold prices retreated following the Fed decision and face selling pressure amid risk-on market sentiment. Support is seen near the 200-day moving average at 1,836. Resistance is seen near the 10-day moving average eat 1,889.

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 turns negative as the Fast Stochastic might generate a crossover sell signal. Prices are oversold as the fast stochastic prints a reading of 16 below the oversold trigger level of 20.

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