Gold prices are poised for a weekly decline, influenced primarily by the Federal Reserve's hawkish stance, which outweighed the temporary support from a US-Iran interim peace deal. Although gold rebounded by 1% on June 18 to $4,297.94 per ounce after falling 1.7% the previous day, analysts like Kelvin Wong of OANDA noted this rise was largely due to short position unwinding driven by the positive news from the Middle East.
The Federal Reserve, under new Chair Kevin Warsh, maintained interest rates at 3.50% to 3.75% but signaled a more restrictive policy outlook. The updated dot plot showed nine out of 18 officials anticipate at least one rate hike this year, with six expecting two or more. This shift has led traders to price in an approximately 85% chance of a US rate hike in December, up from 61% prior to the Fed's decision, according to the CME FedWatch Tool. This expectation of higher interest rates makes non-yielding assets like gold less attractive.
The interim agreement between the US and Iran, which includes a 60-day ceasefire extension and plans to reopen the Strait of Hormuz, caused oil prices to drop. This decline in crude oil helped temper inflation expectations, which typically would benefit gold. However, the Federal Reserve's persistent commitment to its 2% inflation target, coupled with a resilient economy and labor market, means the central bank is not rushing to ease monetary policy, thus capping gold's upside.
Technically, gold faces significant resistance at the $4,360 level. While it briefly surged to $4,329.9 following the US-Iran news, a failure to break and hold above $4,360 could lead to a retreat towards $4,000. Conversely, a sustained break above $4,360 could open the way to $4,500. RHB Investment Bank Bhd (RHB Research) also identified $4,400 as an immediate resistance zone, advising traders to maintain a negative bias until gold closes above this level.
US gold futures for August delivery reflected the broader bearish sentiment, falling 1.5% to $4,317.30 on June 18. Despite the temporary relief from geopolitical developments, the market's focus remains on the Fed's hawkish posture and the implications for interest rates and the US dollar.
