Gold’s Rally Stalled by Hawkish Fed Remarks

Gold spots (XAUUSD) have experienced a modest decline this week, hovering around $2,035 per ounce. The non-yielding bullion found solace earlier this week as the yellow metal inched closer to the coveted $2,040 mark, buoyed by a pullback in the US dollar and Treasury yields. However, the rally remains fragile, overshadowed by hawkish Fed rhetoric and stronger-than-expected economic data suggesting a delayed rate cut timeline. This has dampened market expectations for an imminent rate cut, with traders now pricing in a 68% chance for one in May, down from 80% earlier. 

Despite the soft landing optimism expressed by some Fed officials, gold faces headwinds from rising yields and a strengthening dollar, traditionally seen as antithetical to its appeal. Further muddying the waters are positive risk-on sentiments stemming from China’s stimulus measures, potentially diverting investor attention away from safe-haven assets like gold. 


The 4-hour chart paints a technical picture of indecision. The price action trades along the 20-SMA (green line), below the 50-SMA (blue line), and just above the 100-SMA (orange line), indicating short-term neutrality. The downward-sloping 20-SMA suggests potential downside pressure, while the flat RSI indicates a balanced market. 

Continued downward pressure could find support at the 23.60% Fibonacci retracement level ($2,022.24/ounce). A break below the initial support could offer short-term trading opportunities towards the $2,011.28/ounce and $2,001.79/ounce support levels into play in the short term.  

However, short-term trading opportunities could exist towards the 50.00% Fibonacci retracement level ($2,045.11/ounce) should the price action sustain a push above the 38.20% Fibonacci retracement level. A break above the $2,045.11/ounce level would likely bring the 61.80% Fibonacci retracement level ($2,055.33/ounce) within the bulls’ reach in the short term. 


Gold broke below $2,050 resistance and currently trades below its key moving averages, suggesting short-term weakness. However, continued demand from central banks and a potential soft landing for the US economy could provide underlying support. 

Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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