A strong US dollar has seen gold prices slide on Tuesday as buyers hold their horses as they wait for Wednesday’s Fed interest rate decision. Spot gold traded at $2154 per ounce, after shedding a quarter of a percentage point as of this report. Meanwhile, the commodity traded at $2157 at the futures market. Overall, gold is on a 7-day downtrend but has limited its losses to 1% during that period.
The US dollar is currently favoured by many investors amid uncertainty over the Fed’s interest rate direction. The overwhelming consensus is that a June rate cut is the earliest that can come this year. However, recent inflation data has raised the prospects of a post-June cut. The resultant sentiment will continue to provide support for the dollar against gold, as fewer cuts in 2024 means a stronger dollar.
Also, the dollar enjoys upward propulsion from rising US Treasury yields. The securities are considered an alternative safe haven asset and thus a substitute to gold. Yields on 10-year bonds have stabilized above 4.300% and this will exert more downward pressure on gold prices in the near term.
Generally, gold currently lacks fundamental support for upside movement in the near term, barring a surprise shift in US interest rate direction. Furthermore, its nearly month-long rise from mid-February means that the commodity may have been overbought. Therefore, we should expect a slowdown in purchases by central banks as policymakers digest interest rate decisions. Nonetheless, macroeconomic data will ultimately guide the market trajectory in the mid-term, and this could provide upthrust for gold.
Technical analysis
The buying momentum on gold has weakened, as indicated by the RSI. That means that the sellers are currently in control. Furthermore, they could extend such control if the price remains under the 2163 pivot mark.
That could see them breach the support at 2146, which would help them build momentum to target 2140. However, a move above the 2163 pivot will favour gains by the buyers, with the first resistance likely to come at 2172. A break above that level will see the XAUUSD pair test 2180.
