The price of gold has decreased for the second day in a row due to expectations of elevated interest rates. Federal Reserve policymakers are hesitant to lower interest rates until progress is made in lowering inflation rates, which has had a negative impact on the price of gold. This sentiment is also seen globally, further influencing gold prices as they are sensitive to interest rates.
Gold prices, specifically XAU/USD, have fallen by around a quarter of a percent in the $2,410s as the outlook for interest rates in the US and around the world has shifted. Recent statements from Fed policymakers indicate that inflation has not decreased enough to warrant a decrease in interest rates. This has led to a decrease in the price of gold, as it tends to perform poorly when interest rates are high due to the opportunity cost of holding onto gold.
The gold price may continue to be affected when the Fed releases the FOMC Minutes from their latest policy meeting. If the meeting minutes show a more hawkish stance among policymakers, it is expected that gold will continue to decrease in price. The recent RBA meeting Minutes also revealed a discussion about the possibility of raising rates, showing a shift in stance from previous meetings.
In terms of technical analysis, the gold price is moving towards support from a green trendline that reflects a short-term uptrend that began in May. A Shooting Star Japanese candlestick pattern was formed on Monday, followed by a bearish close the next day, indicating short-term weakness. Despite this, the short, medium, and long-term trends for gold are bullish, suggesting that a recovery is likely after the correction.
If the pullback continues, gold may fall to the initial support at the green trendline around $2,405, with further declines potentially reaching the dark grey upward-sloping trendline in the $2,360s. However, if the gold price breaks above the new all-time high of $2,450, the rally could continue towards the next target at the psychologically significant $2,500 level.
