Gold prices have been on a downward trend, with the XAU/USD pair dropping to $1,956.65 per troy ounce on Tuesday, following concerns about the potential continuation of monetary tightening by the Federal Reserve. Despite this, Wall Street managed to hold onto intraday gains as US Treasury yields remained subdued after Monday's rise.
This downward trend was influenced by anticipated changes in the Federal Reserve's rate hikes, higher US Treasury yields, and easing consumer inflation. These factors led XAU/USD to a ten-day low of $1956.81. The demand for safe-haven assets like gold has been curtailed due to positive market sentiment reflected in Wall Street gains.
Federal Reserve officials have been sending mixed signals about interest rates and inflation control measures. Fed Governor Lisa Cook views the current policy as restrictive enough for price stability, while Minnesota’s President Neil Kashkari questions its adequacy in light of economic strength. Chicago Fed President Austan Goolsbee suggests focusing on how long current interest rates should remain, whereas Fed Governor Michelle Bowman discusses potential additional rate hikes this year.
Investors are closely monitoring these developments and are keenly awaiting Fed Chair Jerome Powell's speech for guidance on future interest rates and the prospect of more hikes this year to achieve the Fed's 2% inflation target.
Technical indicators suggest that if XAU/USD drops below the October 24 intraday low of $1,953.53 (the immediate support level), further decline could occur. However, this bearish trend is mitigated by a bounce after briefly touching the bullish 20 Simple Moving Average (SMA). These indicators are heading south almost vertically and approaching their midlines, hinting at another possible slide in gold prices.
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