Gold Holding its Ground Despite Fed’s Hawkish Turn

Hawkish comments by Fed Vice Chairwoman Lael Brainard triggered a rally in Treasuries yields and an appreciation in the greenback.

Almost 80% of investors are now betting that the Fed will announce an interest rate hike of 50 basis points in its May meeting, as the US central bank seems under pressure to act in order to curb inflation. 

Over 80% of investors are now also forecasting that rates will be at 2.75% or above, by the end of the year while around 45% of them are predicting rates to be at 3.00% by then, according to the CME FedWatchTool.

On the forex market, the U.S. currency has jumped and the EUR/USD is now traded below the 1.09 level. At the same time, the Dollar Index has reached a fresh 23-month-high and is now above 99 points.

Overall, this macroeconomic scenario has impacted gold only modestly. After soaring to $1,940, bullion fell slightly before finding a solid support in the area of $1,920. 

Considering the hawkish mode of the Fed, gold is showing significant resilience, while volatility remains low. 

From a technical point of view, gold remains stuck in a lateral trading range between $1,900 and $1,950. Only a clear break of these levels could be seen as a first directional signal, while investors remain in a ‘wait and see mode’ as they watch out for any significant development in the Ukraine-Russia crisis.

Monitor the Gold Price with Kinesis’ Live Charts

Carlo Alberto De Casa is an external Market Analyst for Kinesis Money.

He also writes as a technical analyst for the Italian newspaper La Stampa.

Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis