Gold prices edged lower on Monday, dropping below $1,847 per ounce. If gold prices increase, resistance may be encountered near $1,890 per ounce, while if gold prices decline, support may be found near $1,804 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 on Monday, and the dollar index dropped to 104.2. US Treasury yields were steady, with the US 10-year bond yield of approximately 3.96%.
Fed rhetoric is expected to affect gold prices this week. Traders are eagerly anticipating Fed Chair Powell’s testimony before the Senate Banking Committee on the 7th and 8th. Powell will appear before Congress on Tuesday and Wednesday to deliver the Fed’s Semi-annual Monetary Policy Report.
The Federal Reserve raised interest rates by only 25 basis points at its February meeting, bringing the benchmark interest rate to a target range of 4.50% to 4.75%. Rate hikes have become less aggressive and may continue at their current pace, but the Fed might raise interest rates for longer than previously expected. This means there are likely still a few rate hikes ahead, which may support the dollar.
Current market odds lean towards further tightening in the upcoming Fed meetings and an increase in interest rates up to 5.25%. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise.
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