Gold dips after Fed rate decision

Gold prices were volatile on Wednesday, rising to $1,960 per ounce in early trading, then dropping to $1,940 per ounce. If gold prices increase, resistance may be encountered near $1,983 per ounce, while if gold prices decline, support may be found near $1,938 per ounce. 

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar dipped in early trading on Wednesday, with the dollar index dropping to 102.7, but soared above 103.2 after the conclusion of the Fed meeting. US Treasury yields were also volatile, with the US 10-year bond yield ranging between 3.77% and 3.83%.   

Major Central Banks continue to raise interest rates, causing economic uncertainty, which provides support for the safe-haven gold. Last week, the Reserve Bank of Australia and the Bank of Canada both raised interest rates by 25bps. The US Federal Reserve paused rate hikes on Wednesday, but the ECB is expected to hike rates on Thursday.

The U.S. Federal Reserve kept its interest rate steady at its policy meeting on Wednesday for the first time in well over a year. Fed officials have voted to keep the central bank’s interest rate at a target range of 5.00% to 5.25%. 

The Fed signaled on Wednesday, however, that its tightening cycle is not over yet and that its peak rate might be higher than anticipated. The FOMC policy statement following the conclusion of the meeting was hawkish, hinting at further rate hikes. Expectations of additional monetary tightening boosted the dollar after the Fed meeting, driving gold prices down.

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Written by:
Myrsini Giannouli

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