The price of gold (XAU/USD) has dropped below $2,400 per ounce on Wednesday, weighed down by a shift in the outlook for interest rates.
Reasons for the Decline:
- Central Bank Hawkishness: Recent comments from the US Federal Reserve and other central banks indicate a reluctance to cut interest rates in the near future. This reduces the appeal of gold, which offers no interest itself.
- FOMC Minutes Await: The release of the FOMC minutes from the Fed’s latest policy meeting later today could further impact gold prices. If the minutes reveal a more hawkish stance, gold could see additional downward pressure.
- RBA Rate Hike Discussion: The recent Reserve Bank of Australia (RBA) meeting minutes also signaled a potential shift towards raising interest rates, adding to the headwinds for gold.
Technical Analysis:
- Trendline Break: Gold has breached the upward trendline that supported the recent price increase.
- Shooting Star Pattern: The formation of a Shooting Star candlestick pattern on Monday followed by a bearish close strengthens the bearish signal.
- Support Levels: A potential downside target could be the upward-sloping trendline in the $2,360s.
Despite the current pullback, the long-term trend for gold remains bullish. However, the direction in the near term will depend on the outcome of the FOMC minutes and overall central bank policy direction. If the Fed adopts a more hawkish stance, gold prices could continue to decline. Conversely, dovish signals or a renewed focus on inflation could lead to a rebound in gold prices.
