Following the Federal Reserve’s decision to raise interest rates by 25 basis points on Wednesday, the Gold Spot Price (XAUUSD) dropped by 1.8%. However, this month’s hike has eased concerns about another increase next month, allowing the Spot Price to recover slightly. Furthermore, the Fed’s commitment to await economic data before making further decisions has boosted sentiment for the safe-haven asset as the end of aggressive monetary policy tightening approaches.
However, yesterday’s robust economic data in the US has further strengthened the Greenback, raising the possibility of more losses for Gold. Forecasts predicted a 0.2% decline in quarter-on-quarter GDP, but the actual GDP growth was 2% to 2.4%, indicating an expanding economy and the effectiveness of rate hikes. Additionally, Durable Goods Orders MoM increased from 2% to 4.7%, far surpassing the forecasted 1% decline. Time will tell if the precious metal can withstand added pressure from a strong Greenback.
Technical
The Gold Spot Price experienced a 1.8% drop on Thursday, establishing support at $1943.35 per ounce. However, the price action recovered slightly, establishing resistance at $1953.73 per ounce, the 38.20% Fibonacci level. If the upward momentum persists, the $1977.67 per ounce resistance may be a point of interest towards the $1987.32 per ounce major resistance if the price action encourages a breakout from the 50% level.
However, weakening demand could see the $1953.73 per ounce resistance hold, which may encourage a breakdown towards the $1943.35 per ounce support at the 50% level. If the Spot Price edges below the 50% level, the Golden Ratio may be the next point of interest in furthering a downward trend.
Summary
The Gold Spot Price dropped by 1.8% due to the interest rate hike by the Fed, which could limit the price action’s gains. If the leg-up is sustained, the $1977.67 per ounce resistance could be a point of interest in reaffirming an upward trend. However, dwindling demand could result in the Spot Price retesting the $1932.97 per ounce support.
Sources: TradingView, Reuters, Trading Economics
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