Gold prices declined on Thursday due to the strengthening U.S. dollar and rising bond yields. This happened after the U.S. Federal Reserve (Fed) signaled a possible interest rate hike this year.
On Wednesday, the price of the metal hit its highest level since September 1, reaching $1,947.40 an ounce, before the Fed signaled its future course.
The FOMC held its target range for the federal funds rate at 5.25% to 5.5%, while updated quarterly projections showed 12 of 19 officials favored another rate hike in 2023.
The central bank has outlined a tougher course of action to fight inflation through 2026. According to the regulator's officials, there is a possibility of lowering inflation without damaging the economy and causing significant job losses.
According to IG market strategist Yeap Jun Rong, if the gold price declines further, the $1,900 level will be considered as the near-term support.
Today, investors will pay particular attention to the Bank of England's decision regarding a possible end to the series of interest rate hikes that began in December 2021.
High interest rates are curbing demand for the yellow metal, which does not generate interest yields. However, market participants are quickly adapting and taking current conditions into account. This is particularly evident in the gold price chart. The current rhetoric of the Fed has failed to sufficiently reduce the cost of the precious metal, given the extent of importance of its forecasts for the U.S. economy.
The D1 time frame of the gold price chart shows the formation of a broad correction. The strong news background of the current week did not create conditions for the development of a new trend.
In terms of wave analysis, the price is forming the third ascending wave on the H4 time frame. Breaking through the top of the first wave at 1953.00 will strengthen the upward price movement.
Short-term prospects for gold suggest buying.
The target is at the level of 1970,00.
Part of the profit should be taken near the level of 1950,00.
A stop-loss could be placed at the level of 1899,00.
The bullish trend is short-term, so trade volume should not exceed 2% of your balance.