- Gold moves lower on Wednesday for the fourth day in a row and hits a multi-day low.
- Expectations of a Fed rate hike benefit the dollar and put pressure on the yellow metal, denominated in dollars.
- Risk-off sentiment is unsupportive as attention turns to Fed Chairman Jerome Powell’s testimony.
The Prayed has seen some selling for the fourth day in a row on Wednesday and has dropped to a four-day low around the $1,823 region during the first half of the European session.
Investors seem convinced that the Federal Reserve will maintain its aggressive tightening policy and raise interest rates at a faster pace to curb rising inflation. In fact, markets have been pricing in another 75 basis point rate hike at the next FOMC meeting in July. The expectations of the Fed, of a more aggressive nature, gave some support to the US dollar, which in turn reduced the demand for gold denominated in dollars. The bulls seemed unimpressed by the risk-off sentiment, which tends to benefit the safe-haven XAU/USD.
Market sentiment remains fragile amid doubts that the main central banks can raise interest rates to curb rising inflation without affecting economic growth. This, coupled with global supply chain disruptions caused by the Russia-Ukraine war and the recent COVID-19 outbreak in China, continued to fuel recession fears. The worsening global economic outlook weighed on investor sentiment, triggering a new wave of risk aversion and caused a sharp drop in stock markets.
Aside from a stronger dollar, the drop could also be attributed to some technical selling amid repeated failures near the all-important 200-day SMA in the last two trading sessions. However, it remains to be seen whether the bears are able to maintain control or refrain from opening aggressive positions ahead of Fed Chairman Jerome Powell’s semi-annual testimony before the Senate Banking Committee. Market participants will be looking for further clues on the Fed’s policy tightening path, which will weigh on the dollar and help determine the next directional move for non-yielding gold.
gold technical levels
Source: Fx Street
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