The gold market is holding strong and near-session highs following the latest Fed rate hike. The Fed just raised its main interest rate by another 25 basis points, putting interest rates at a 22-year high. The markets showed little initial reaction to the rate hike, which was fully expected to happen. Markets are likely to be far more interested in Fed Chief Jerome Powell’s remarks at the press conference that follows the rate decision.
Markets will likely now be wondering whether Powell and the Fed will continue to lean hawkish or if they ease up a bit given the weaker recent inflation readings. Powell’s commentary could certainly be market-moving, and even if not today, his comments may send gold and stocks moving up or down in the days ahead. The reaction, if any, by gold, stocks, and other markets is likely to depend on whether more hikes are expected in the coming months. The Fed has now raised rates 10 times in its efforts to combat runaway inflation, and despite still being over its desired target, inflation has come in quite a bit in the last few months. If the Fed signals it is comfortable with rates where they are at, gold and markets could see a rally. If the Fed gives the impression that more hikes are still to come, gold and other markets could come under renewed selling pressure.
The Federal Reserve and its plans for interest rates are major factor for gold and other markets. They are not the only factor, however. The ongoing war in Ukraine may also play a role. Increased tensions between the U.S. and Russia could keep buyers interested in gold, and any further geopolitical issues could elevate the market substantially. Worries over a nuclear attack, Chinese invasion of Taiwan or other acts of violence may keep buyers looking to gold to protect their holdings. If the number of unknowns should rise around the globe, it could keep gold on the offensive.
The gold bulls have the advantage on the daily chart. That advantage is not by much, however, and the bulls will need to exhibit some fresh buying power soon in order to keep the bears at bay. The three-week old uptrend on the daily chart is still intact, albeit not by much. The bulls will need to produce a close above the $2,000 level soon to keep momentum going. Failure by the bulls to do so may lead to the bears taking over control of the market. The bears would look to produce a close first below the $1,950 level and then the $1,900 level. A close below the $1,900 level would be especially bearish, as it could likely force the bulls in the market to throw in the towel and give up. The market is now within striking distance of the $2,000 level, and a test of this key barrier may be seen in the days ahead.