Gold Price Forecast: Oversold XAU/USD Continue Selling
ANALYSIS OF GOLD (XAU/USD)
- In the wake of the Fed’s aggressive rate expectations, gold entered the oversold territory.
- The pre-invasion level of 1611 is still within reach as the precious metal continues to be burdened by fundamentals.
AFTER HAWKISH FED FORECASTS, GOLD ENTERED OVERSOLD LEVELS
Except for the Bank of Japan, global central banks are increasingly adopting the contractionary monetary policy, which negatively affects gold. The market had to catch up with the Fed’s most recent summary of economic prospects because Fed members were more pessimistic than anticipated. This was especially true of the dot plot, which projects the Fed funds rate over time.
Fed funds futures implied probability predicted that the Fed would raise rates by over 4% initially, but that rate cuts would soon follow. The market reacted when the Fed’s dot plot showed a unanimous desire for rates to finish 2023 higher than 2022. This implied that rates would stay higher for longer. Since the day of the FOMC meeting, the dollar (DXY) has increased by around 4.6 points (4.19%), putting more pressure on the precious metal when other global commodities continue to decline.
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