Gold sell

Tough Fed policy next week might put pressure on gold

27 April 2023 160
Tough Fed policy next week might put pressure on gold

Gold is weakly attempting to rise today. Volatility in the instrument is fading, which is quite logical, as investors are expecting the Fed meeting next week. The market forecasts interest rate hike of 0.25% to 5.25% in May. Further, rates are projected to decrease, even though there are no official statements from the U.S. central bank representatives on this matter. Therefore, the regulator's comments on further monetary policy actions will be important at the next meeting.

Problems with the U.S. debt ceiling might be resolved soon, as the case has moved on. If a borrowing increase is approved, the uncertainty in the U.S. economy will decrease, so gold could correct.

The U.S. House of Representatives supported a Republican initiative to raise the national debt ceiling and reduce government spending called the Limit, Save and Grow Act.

Republicans see this bill as a starting point for negotiations with Democrats and U.S. President Joe Biden to raise the borrowing limit.

The rise in the national debt that hit the ceiling does not allow the regulator to meet its financial obligations in time. Investors lose confidence in the U.S. dollar and use investment alternatives, such as gold and silver.

Artificial intelligence (AI) predicts the tough regulator’s policy at the Fed meeting, which is negative for gold.

Joseph Lupton and other JPMorgan Chase & Co. economists developed a ChatGPT-based language model to detect policy signals and forecast its future course. The Fed statements over the last 25 years were analyzed for this purpose.

According to the technical analysis, a pennant pattern is forming on the hour timeframe. The prices are now closer to the upper limit, so it is worth opening short positions. The downside target will be the level of $1,982. This is the lower limit of the figure. A Stop-loss should be placed at exiting through the upper limit, which corresponds to the price of $2,010.

Despite some uncertainty about the Fed’s actions in recent months, the JPMorgan model indicates that the hawkish stance of the central bank remains.

Gold prices are likely to decline:

Take profit – 1,982

Stop-loss – 2,010

This content is for informational purposes only and is not intended to be investing advice.

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