#Gold Technical Analysis##Fed Policy Meeting# 24K99 News On Thursday (June 13th), spot gold suddenly fell sharply in early Asian trading, and the gold price is currently around 2308 US dollars/ounce, plunging more than 16 US dollars on the day.
(Spot gold 5-minute chart Source: 24K99)
FXStreet analyst Christian Borjon Valencia pointed out that the technical pattern of Gold is showing a head and shoulders pattern, indicating that gold prices will further decline.
Gold prices continued their strong fluctuations during the New York session on Wednesday. After the release of CPI data by the United States, spot Gold prices rose sharply from below $2,315 per ounce to a high of $2,341.67 per ounce.
After the Fed's decision, Gold prices fell significantly from around $2,335 per ounce, and after Fed Chairman Powell's press conference, Gold prices accelerated their decline and fell to below $2,316 per ounce. At the close of Wednesday, spot Gold rose by 0.34% on the day to close at $2,324.73 per ounce.
The Fed decided to stay on hold for the seventh consecutive time on Wednesday. The statement issued by the decision-making team after the interest rate meeting did not change much from the previous month, only stating that some progress had been made in fighting inflation. The "dot plot" and the comparison with three months ago have fluctuated greatly, indicating that the Fed's policymakers have reduced their prediction of the number of rate cuts in the year from three to only one.
The Fed kept the Federal Funds Rate target range unchanged at 5.25% to 5.50%, in line with market expectations. The statement issued after the Fed meeting stated that recent indicators show that economic activity continues to expand steadily. Employment growth remains strong, and the unemployment rate remains at a low level. Inflation has slowed over the past year but remains high. In recent months, moderate further progress has been made in achieving the Committee's 2% inflation target.
"Fed megaphone" Nick Timiraos said that four Fed officials expect no interest rate cuts this year, up from two in March. Seven officials expected one cut this year, and eight officials expected two cuts. This means a slight majority believe that there will be at most one interest rate cut this year.
At the subsequent press conference, Fed Chairman Powell said that the US economy has made significant progress. He said the Fed generally expected GDP growth to be lower this year than last year. A broad range of indicators show that the labor market has returned to pre-pandemic levels.
"Still highly concerned about inflation risks. We haven't had greater confidence in inflation for rate cuts since the start of the year. If the economy remains stable and inflation continues, we are prepared to keep rates unchanged in appropriate circumstances," Powell said.
Powell reiterated that although the inflation rate has fallen sharply from its high point, it is still too high, and emphasized that this year's inflation data has not made the Fed "more confident" to approach the 2% target. The Fed still maintains its tight monetary policy stance.
Analyst Enda Curran said that Fed Chairman Powell seems to be carefully controlling his information. He did not ignite expectations of a rate cut in September, and said that they need greater confidence in inflation, but he also made it very clear that officials are watching the data and evaluating it monthly. He did not confirm or rule out any possibilities.
How to trade after the sharp drop in gold prices?
FXStreet analyst Christian Borjon Valencia pointed out that looking at the daily chart of Gold, after forming a head and shoulders pattern, Gold remains neutral to bearish, which suggests that Gold may weaken.
Valencia said that if Gold falls below $2,300 per ounce, the next support area will be the May 3 low of $2,277 per ounce, followed by the March 21 high of $2,222 per ounce.
If the above levels are breached, Gold prices may further decline, with sellers perhaps targeting the head and shoulders pattern target range (around $2,170-2,160 per ounce).
(Spot gold daily chart source: FXStreet)
On the upside, Valencia added that if Gold rises above the June 7 high of $2,387 per ounce, this would negate the head and shoulders pattern and open the door for Gold to test the $2,400 per ounce level.
Economies.com, a well-known financial website, said that Gold prices hit a high of $2,340.10 per ounce on Wednesday before falling back, which means the bearish trend is still valid in the short term. The stochastic indicator is sending negative signals, supporting bearish expectations. The main target for Gold is $2,272.06 per ounce.
(Spot gold 4-hour chart Source: Economies.com)
At 09:37 Beijing Time, spot Gold was reported at $2,308.49 per ounce.