Two Possible Scenarios and Technical Levels for Gold Prices Ahead of Fed Decision
The gold market shows a tendency to recover, finding support from the oil and bond markets ahead of the Fed's interest rate decision and statements by Chair Warsh.
Supported by the decline in oil prices and the easing of US Treasury yields ahead of the Fed's critical interest rate decision, gold recovered to the $4,326-$4,328 per ounce levels. Investors, meanwhile, focused on the post-decision messages and two possible scenarios.
Fed Decision and Market Expectations
Markets price in a 92.4% probability of at least a 25 basis point rate hike from the Fed. While the expected increase is largely priced in, it is stated that the most critical element will be the monetary policy signals to be given after the decision.
Possible Impacts of Chair Warsh's Statements
Fed Chair Warsh signaling further rate hikes could support short-term bond yields and the dollar, increasing pressure on gold. More cautious statements regarding growth and financial conditions could pave the way for a recovery.
The Role of Bond and Oil Markets
The US 10-year Treasury yield is hovering around 5.2%, and the retreat in yields is helping gold recover. While oil moving away from its peaks eases inflation pressure, concerns regarding energy supply continue to remain alive.
Technical Outlook and Critical Levels
In the technical outlook, it is important for the $4,316-$4,326 zone to be decisively breached. In this case, the $4,366 level, followed by $4,402 and $4,435, will be monitored. On the downside, the first support point is at $4,307.