Gold Price Braces For Fed Rate Hike
New York (may 30) Gold prices slid modestly lower in early trading Tuesday as two-way trade emerges following Friday's gains. The short-term trend is bullish for gold, but the market is waffling as investors brace for a Federal Reserve interest rate hike at the June 13-14 meeting. A rate increase is widely expected, and largely priced into the financial markets, but nonetheless, the prospect of higher interest rates is dampening gold market enthusiasm to start the week.
A full slate of Federal Reserve speakers will be seen this week. Today, Fed Governor Brainard, a voting member and known dove, speaks on the economy and monetary policy at the New York Association for Business Economics at 1:00 pm, ET. Traders will be monitoring Brainard's speech and other Fed officials comments this week for clues that the Fed's projected pace of interest rate hikes could increase. Currently, the market is anticipating two more rate hikes in 2017 and three in 2018.
Despite the rising interest rate environment, a bevy of other factors create a positive environment for gold and precious metals. Another factor lurking in the background that could prove gold supportive in the weeks ahead is the unfolding budget drama in Washington D.C. There are fresh concerns that Congress and the white House could have difficulty reaching an agreement in September to raise the federal debt limit and approve government funding for Oct. 1.
It was the debt limit and budget debacle that helped propel gold to its all-time high above $1,900 an ounce in 2011. Uncertainty in Washington, and amid geopolitical and economic concerns on the international stage will limit downside in gold in the days ahead.
Technical Analysis
The short-term trend is bullish for Comex August gold futures as the market trades above its 20-day moving average, shown in red. Strong support lies at $1,217.80, the May 9 low. On the upside, a bullish target for gold lies at $1,300.30. For now, the gold market is consolidating in the upper half of that range. As long as support at $1,217.80, gold bulls will retain the upper hand in the intermediate-term trend.
Source: KitcoNews
