Gold markets saw more negative pressure during Tuesday’s session, as markets continue to try to understand what the Fed will do on Wednesday.
Gold started falling again during Tuesday’s trading session, although it probably won’t be too surprising. We have a Federal Reserve meeting on Wednesday, and a lot of people will be interested in it. So, in this case, it is probably not a big surprise that we may hesitate to act excessively.
In the end, Jerome Powell may end up being somewhat hawkish in the press conference, and this could put downward pressure on gold if that happens. Meaning you as a trader I think that’s great. I think it’s good news because you’ll be able to buy it at a lower level. The $2,300 level, of course, is an area that many people will be interested in.
So, it will be interesting to see how we behave in that public area. But as things are now, I think we have to look at that as just an area where we might be involved. Keep in mind that it will be very difficult to act aggressively between now and the press conference. So, I think you’re in a state of waiting and seeing some kind of situation, although we’re definitely going to see level 2300 to have some kind of effect.
If we break below that level, the 50-day moving average followed by the $2200 level can be targeted. But we will have to wait and see how this will be done. The 2400 level at the top is an area where we have seen a lot of resistance in the past, so if the $2300 level holds, the $2400 level is likely to be a high.
The impact of monetary policies and geopolitical tensions on gold prices
Gold is trading lower on Tuesday, placing it below $2,320 an ounce, as traders expect the next Federal Reserve meeting on Wednesday. Despite this decline, gold is on track for its third consecutive monthly gain, with an increase of almost 4% during the month.
The Fed’s impact is focused on the FOMC decision due on Wednesday, where a hawkish shift is expected in response to recent inflation trends. Swap traders have revised their forecasts, and now expect a maximum of two rate cuts by the end of the year, the lowest number since November 2023. Overall, higher interest rates weaken gold’s appeal because it yields no interest.
Strong demand and geopolitical tensions support gold’s rise since the beginning of the year by more than 12% strong demand from Asian markets, especially China, and ongoing geopolitical tensions in regions such as Ukraine and the Middle East. The World Gold Council has announced a record start to the year in the central bank’s purchases of gold. Moreover, a weaker US dollar, partly due to speculation about Japanese intervention in currency markets, has also supported gold prices.
While geopolitical instability and central bank demand have been the main drivers of gold’s recent gains, the focus has shifted towards macroeconomic indicators and central bank policies. The upcoming US nonfarm payrolls data and the direction of Federal Reserve policy will be decisive in shaping market expectations. Despite the current pullback, analysts maintain a positive outlook for gold, expecting a possible rise to $2,500 after a healthy correction.
However, the long-term outlook for gold remains fundamentally bullish. Despite potential short-term declines due to a stronger dollar and rising interest rates, ongoing geopolitical risks and continued demand, especially from central banks and Asian markets, provide strong support to gold prices.
Gold prices fall and the impact of Federal Reserve decisions on the gold and Bitcoin market
The price of gold has been in a spectacular uptrend amid tensions in the Middle East, but the price has been falling since last week. The two-day meeting of the Federal Open Market Committee (FOMC) on April 30 and May 1 put gold prices under further pressure due to fears of a longer interest rate hike by the US Federal Reserve. With safe-haven demand waning, is Bitcoin heading for a fall to $60K?
Gold prices drop due to Bitcoin price drop to $60k
Gold fell 1% on Tuesday, settling near $2,300 an ounce ahead of the Federal Reserve’s monetary policy decision and nonfarm payrolls data due later this week. Investors await clues to the Fed and Jerome Powell’s monetary stance as recent U.S. economic data cut expectations of interest rate cuts.
Recent PCE data indicated continued inflationary pressures and first-quarter GDP growth of 1.6% showed stagflation. The Fed needs new positive signs of low inflation as it keeps the benchmark interest rate steady at 5.25% to 5.5%. The forecast market estimates just one Fed rate cut for the year, predicting a tough stance from President Jerome Powell at the next meeting.
Higher interest rates reduce the attractiveness of non-yielding gold. However, gold remained supported by strong physical demand from China and geopolitical risks in the Middle East.
In short, while the Fed’s hawkish measures could temporarily mitigate gold’s rally, persistent demand and macroeconomic uncertainties suggest that the trajectory of the gold price is likely to rise once these direct pressures subside.
