The precious metal gold had reclaimed its celebrated position above $1900 on Thursday during the Asian session after the Fed’s speech yesterday failed to satisfy the investors’ curiosity, who hoped for a higher interest rate hike by at least 75 basis points.
Gold prices has been pushed down to hades; to as low as $1956 all through the last week of April and the first week of May; due to the heightened fear over a hawkish interest rate hike by the Fed, has once more reclaimed its prominent position above 1900 with over 450pips gains this week alone. This is because many considered the recent hike as a more dovish attitude.
During the Fed’s speech yesterday, Fed Chairman – Jerome Powell disclosed that the interest rate hike to be implemented is finally slated at 50 basis points. This was below the general market expectations, which hoped for at least a 75 basis points increment.
Fed Chair Powell made it clear that the Fed is not “actively considering” a 75 basis point interest rate hike as some investors have hoped. He further explained that this decision is because the Fed wants to meet up with the market expectations. Hence, they chose to go slower than what the investors were counting on, a 75 basis point increase in the interest rate hike.
This lowered interest rate hike seems to have weakened the US dollar that has performed at its peak for over four weeks now. The dollar index fell to 102.5 from its peak at 105 during the Asian session.
Investors are returning their investments into risky assets, given yesterday’s unsatisfactory interest rate hike. Gold has always been the investors’ choice in such situations. The bulls have finally dominated the market, wiping away the bears in just an instant. Gold’s weekly close tomorrow will be very decisive in ascertaining the general trend for the rest of the month.
At present, the next resistance for gold is $1956. Any sustained break below 1900 might take us back to the support of 1984. We hope for more gains in gold to end the week.
