Gold prices volatile on Fed rate uncertainty

Gold prices were volatile on Wednesday, with gold prices fluctuating around the $1,932 per ounce level. If gold prices increase, resistance may be encountered near $1,973 per ounce, while if gold prices decline, support may be found near $1,924 per ounce. 

Fed Chair Jerome Powell delivered his much-anticipated testimony about the Semi-Annual Monetary Policy Report before the House Financial Services Committee on Wednesday. His testimony comes in two parts and will be completed on Thursday. Powell’s speech on Wednesday had hawkish undertones, pointing to further rate hikes up ahead. Powell stated that inflation still has a long way to go, increasing the odds of another rate hike in July’s meeting.

The U.S. Federal Reserve kept its interest rate steady at its policy meeting last week 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 has signaled 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.

The dollar’s movement has predominantly directed gold prices, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar edged lower on Wednesday and the dollar index touched the 102.1 level. US Treasury yields were steady on Wednesday, with the US 10-year bond yielding 3.72%.

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Written by:
Myrsini Giannouli

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