Fed hawkish forecasts support bearish sentiment in gold

The gold price is decreasing today. We wrote about the potential weakness of the precious metal in our forecasts earlier. Commodity markets started the reevaluation in response to stronger-than-expected inflation and a stable US labor market.

Hawkish comments of the Fed were the additional trigger for the decline in gold prices, and they raised concerns about a further increase in interest rates. Loretta Mester, president of the Federal Reserve Bank of Cleveland, said that interest rates are likely to rise above 5% as the Fed will fight inflation.

In January, India's gold imports fell by 76% compared to the previous year. Gold supplies in the country decreased to a 32-month low because of low demand. This happened after domestic prices rose to record highs and jewelers postponed purchases, hoping for a reduction in import duties. Earlier, experts expected an increase in market activity amid the ongoing wedding season.

The emerging weakness in demand for physical gold may put pressure on the market.

Yesterday, data on the Purchasing Managers’ Index (PMI) was published. It turned out to be stronger than previously expected.

The Empire State survey showed that the Business Sentiment Index (BSI) this month rose to -5.8 compared to -32.9 in January. The Business Sentiment Index (BSI) grew by 27 points but remained below zero.

Such data shows that the Fed may continue to keep the key rate higher than the market expects. This is a negative signal for gold, and it has already begun to be reflected in the evaluation of the precious metal.

According to technical analysis, gold demonstrates its weakness again. There was another downward exit from the flat today. Thus, the medium-term downtrend is still relevant. You can continue to open short positions to implement an exit from the rectangle. In this case, the target will be $1810. Stop-loss can be placed when the downtrend breaks — on $1845.

Decrease in gold:

Take profit — 1810

Stop-loss — 1845