Gold Price Forecast XAU/USD – Headed for Biggest Monthly Loss Since June 2021 on Fed Rate Hike Fears

Gold futures are inching lower on Tuesday after failing to follow through to the upside following yesterday’s potentially bullish technical reversal. The price action was likely fueled by short-covering due to oversold technical conditions. The fundamentals are still bearish, especially since traders aren’t sure where and when the Fed will stop raising interest rates.

At 06:51 GMT, April Comex gold futures are trading at $1822.30, down $2.60 or -0.14%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $168.97, up $0.62 or +0.37%. With gold headed for its most significant monthly loss since June 2021, traders fear there is more downside risk ahead in March as impending interest rate hikes by the U.S. Federal Reserve sapped the non-yielding asset’s investment appeal.

“The question is, ‘How much more to hawkish Fed repricing?’ and this highly depends on how U.S. data turns out and, in particular, if the disinflation trend can be more entrenched than bumpy,” said OCBC FX strategist Christopher Wong.

“A pause in hawkish Fed repricing could see USD momentum ease, supporting gold.” But he’s talking like a biased strategist. A weaker dollar will bring in some gold buyers because it is a dollar-denominated asset.

The real question is not ‘How much more to hawkish Fed repricing?’ but what should the inflation level be? Where does the unemployment rate have to be to convince the Fed to take a pause?

These are some significant unknowns. And when there is uncertainty, investors tend to sell. This is why we’re looking for further downside pressure. The market is only going as far as July, with 25-basis point rate hikes coming in March, May, and June. Furthermore, traders expect the Fed’s target rate to peak at 5.403% in September.

The way I see it unless the Fed decides to go big with 50-basis point rate hikes, gold could be under pressure for another 90 to 180 days. Even Fed Governor Phillip Jefferson sounded slightly uncertain on Monday when he said he was under “no illusion” that inflation would return quickly to the Fed’s 2% target and noted that the Personal Expenditures index remained “elevated.”

Although several unknowns drive the uncertainty, we know that the gold market and the Fed will remain data dependent and that traders are still in a “sell the rally” mode.

This Post Has 8 Comments

  1. TimothyPat

    mexican border pharmacies shipping to usa: medication from mexico – medication from mexico pharmacy

  2. NormanVaf

    farmacias online seguras: farmacia online madrid – farmacia online espaГ±a envГ­o internacional

  3. e-commerce

    Wow, wonderful weblog layout! How long have
    you ever been blogging for? you made running a
    blog glance easy. The whole glance of your site
    is magnificent, let alone the content material! You can see similar here
    dobry sklep

  4. binance ftx

    Thank you for your sharing. I am worried that I lack creative ideas. It is your article that makes me full of hope. Thank you. But, I have a question, can you help me?

Leave a Reply

Contact Us

Disclaimer

Forex, Crypto, Options, and Binary Options have both large potential rewards and large potential risks. Therefore, before investing or trading any of the assets, ensure you are aware of and willing to accept the accompanying risks. Do not trade money you cannot afford to lose.

All Rights Reserved. None of the content of this website can be published elsewhere by any means without the prior consent of the owner(s). Please, check our terms & conditions and privacy policy before continuing to use this website.

This website and its owner(s) are not in any way liable for any incurred loss, whether caused by the information provided on this website or otherwise. The use of this website, including the content and information provided, is the user’s sole liability.