- Gold advanced to a new historical maximum of $ 3,045 on Wednesday.
- The operators consider the next meeting of the Fed while incorporating geopolitical news from Türkiye and Ukraine.
- The recovery of gold begins to seem a bit exaggerated and could see a setback soon.
The price of gold (Xau/usd) corrects slightly at $ 3.031 at the time of writing on Wednesday, after having uploaded and reaching a new historical maximum of 3,045 $ early in the day. The positive movement occurred after the headlines that arose about the arrest of the mayor of Istanbul, Ekrem Imamoglu, the main political rival of President Tayyip Erdogan, under positions that include corruption and support for a terrorist group.
This headline adds to the geopolitical drivers in gold after Tuesday’s phone call between the president of the United States (USA), Donald Trump, and the Russian president, Vladimir Putin, who did not lead to a high -fire agreement or a great advance. Trump and Putin agreed to an immediate pause in attacks on energy infrastructure in the Ukraine War. However, the Ukrainian president, Volodimir Zelenski, said Tuesday night that conversations about Ukraine without Ukraine will not bring results.
However, operators in the precious metal could face some winds against later this Wednesday, since the Federal Open Market Committee (FOMC) is ready to announce their decision on the policy rate and publish the update of the Summary of Economic Projections. After the meeting, the president of the Federal Reserve (Fed), Jerome Powell, will comment at a press conference. With Trump’s policy as a backdrop, the markets will want to know how many, if there are, feat cuts have planned the members of the Fed by 2025 and beyond.
What moves the market today: Powell in command
- Despite Trump and Putin’s almost euphoric comments, several analysts see the recent agreement of Alto El Fuego “Delgado” as a small victory, not as a step towards peace. Putin and Trump agreed that there will be no attacks on energy objects for 30 days, says Bloomberg.
- According to the CME Fedwatch tool, the probabilities that the FED maintain interest rates in the current range of 4.25-4.50% on Wednesday are 99%. Meanwhile, the probabilities of rate cuts for the June meeting are 64.8%.
- The operators are reducing their bets on a greater relief of monetary policy this year, which would weigh on the precious metal, since the highest yields are bassists for gold. On the other hand, there are still concerns about a deceleration in the USA since the tariff agenda of President Donald Trump weighs on the feeling of the consumer. Investors have been reducing their holdings of US shares to the largest registered extent, according to the latest Bank of America survey, underlining a massive rotation in the markets, Bloomberg reports.
Technical Analysis: Be attentive to $ 3,000
Gold achieves another new historical maximum at the beginning of Wednesday before the decision on the interest rate of the Fed. The risk of tail in the event is whether the Fed points graph (a chart where each FOMC voter scores where it sees the monetary policy rate by 2025 and beyond) writes less cut cuts than the markets anticipate. That would increase the fear of a recession or stagflation in the US, with rates that remain high to combat increasing inflation caused by a commercial war in tariffs, and would be negative for gold.
As for technical levels, the new historical maximum of 3,045 is the first level to win. Next, for this Wednesday is the R1 resistance at 3,048 $, just below the round number of 3,050 $. Once surpassed, R2 resistance stands at 3,063.
Downward, the intradic pivot point at 3.024 $ is the first line of defense, followed by the S1 support about $ 3.010 before the level of $ 3,000. In case the 3,000 $ brand is broken, look for $ 2,985 as a great support.
Xau/USD: Daily graphic
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
