Gold price has been recording rather subtle movements in recent sessions as investors eye the Fed meeting scheduled to start on Tuesday. Investors are pricing in the first rate hike in March. This would be the first time that the central bank rises rates since December 2018.
As a reaction to the interest rate decision scheduled for release on Wednesday, gold price may ease on its current uptrend as Treasury yields and the US dollar edges higher. Earlier on Tuesday, the benchmark 10-year US bond yields were at 1.76% after bouncing from the previous session’s low of 1.70%.
Gold price will also be reacting to the US consumer confidence data slated for release on Tuesday afternoon. Analysts expect a reading of 111.8, which is a decline from December’s 115.8. The index measures the consumer’s level of confidence regarding their purchasing power and broader economic prospects. A higher-than-expected reading will likely boost the greenback while limiting gold’s upward potential.
Gold price prediction
Gold price is trading within a horizontal channel for the fifth consecutive session. Investors are keen not to place huge bets ahead of the Fed interest rate decision that will mark the end of the two-day meeting. The range’s upper and lower border is at the two-month high of 1,848.18 and along the 50-day EMA at 1,829.93 respectively.
On a four-hour chart, the precious metal is still above the 25 and 50-day exponential moving averages. Based on these technical indicators, it will likely remain on an uptrend in the short term.
On the one hand, price pressures will likely continue to boost gold price based on its traditional status as a hedge against inflation. However, an environment defined by higher interest rates is generally bearish for the precious metal.
Amid the opposing forces, I expect it to remain steady above the crucial level of 1,800. As it reacts to the Fed interest rate decision and subsequent movements in Treasury yields and the US dollar, gold price may drop past the 50-day EMA at 1,820.20. On the flip side, a move past the resistance zone of 1,850 will likely push the price to November’s high of 1,870.