Gold Prices Reverse Lower After a ‘Hawkish’ Fed Meeting

Gold prices plunged after the Fed signaled just one interest rate cut in 2024, down from previous expectations of three cuts, boosting the U.S. dollar and Treasury yields.

On Thursday, gold dropped the most in a week as the U. S. Federal Reserve increased the outlook for interest rate hikes following its policy decision.

The Fed left its main interest rate unaltered in the 5. 25-5. 5% range as anticipated. But policymakers suggested they now anticipate a mere one rate cut in 2024 as opposed to what they had estimated in March.

This shift in the stance of monetary policy to a more aggressive position caused ripples of effect across financial markets by increasing the demand for the U. S. dollar and treasury bills and reducing demand for bullion which does not offer any yield.

In the MCX, the far-month August 2024 gold futures contract began at ₹71,475 per 10 grams and touched an intraday low of ₹ 71,401.

In the international markets, spot gold remained at $2,315 per ounce, down over 1% from the day’s high, and Comex gold futures were near $2,330.

HDFC Securities – Head of Commodity & Currency Anuj Gupta commented: “The drop in gold prices today is clearly attributable to the meeting outcome being more hawkish than was expected. ” ‘The Fed downgrading rate cut expectations triggered a jump in the US dollar and yields and put immense pressure on gold.

Speaking to the press, Dhawal Dhanani, Fund Manager at SAMCO Mutual Fund, admitted that the market had expected 1-2 cuts for the year-end when the Fed came out with a ‘big hawkish stance’ of signaling just one cut, though it had initially projected three in March.

Technically, the next major support zone for MCX gold is seen in the region of ₹ 70,800 and the immediate overhead resistance is expected in the ₹ 72,000 zone. The initial support for spot gold price is found at $2300/oz and resistance levels are at $2330/oz and $2350/oz.

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Inflation still remains high, and there is more rate hike in the pipeline, which makes gold’s trend highly dependent on data during the uncertainty.