Will the Federal Reserve remain on hold this week? The 'dot plot' may again trigger a hawk-dove game. Gold fluctuates at a low level.
Last week's non-farm employment report suggests the Federal Reserve may maintain high interest rates for an extended period, putting continued downward pressure on gold. Investors are currently focused on US consumer inflation data and the Federal Reserve's interest rate decision. In March this year, China and Russia vetoed a Gaza ceasefire resolution, arguing it would give Israel a green light to attack Rafah. Prior to this, the US vetoed three draft resolutions, two of which called for an immediate ceasefire. This news dampened safe-haven buying of gold and put further pressure on gold prices. The Federal Reserve will release its latest interest rate decision this week, along with an updated quarterly economic forecast, including the so-called 'dot plot' of interest rate projections. As no significant policy changes are expected at this week's meeting, the focus will be on the new quarterly interest rate projections, the so-called 'dot plot'. Looking at the gold daily chart, the Relative Strength Index (RSI) has fallen below 50, reflecting a strengthening bearish trend. Gold prices have broken below the 23.6% Fibonacci retracement level of $2320 per ounce from the upswing since mid-February, as well as the psychological level of $2300 per ounce. In the short term, stronger support for gold prices lies at $2260 per ounce. If gold prices continue to break below this level, it could trigger a new round of selling and a fall towards the 100-day moving average of $2217 per ounce. On the upside, any recovery in gold prices would require a break above the 50-day moving average of $2343 per ounce. Looking further up, reclaiming the 21-day moving average of $2355 per ounce would be key to eliminating the recent bearish bias.
Time:
2024-06-12 08:40
First Gold Gold News, June 11: During the intraday European session, Spot gold traded in a narrow range, currently hovering around $2306 per ounce. Last week's non-farm payroll report suggests the Fed may maintain high interest rates for a longer period, putting continued downward pressure on gold. Investors are currently focused on US consumer inflation data and the Fed's interest rate decision.
On Tuesday (June 11), spot gold opened at $2312.19 per ounce. As of press time, spot gold is currently at $2304.94 per ounce, down 0.25%.
On Monday (June 10), the UN Security Council adopted a US-drafted ceasefire agreement aimed at ending eight months of bloody fighting between Israel and Hamas in Gaza.
After nearly a week of negotiations, the 15 members of the Security Council finalized the resolution draft approved by US President Joe Biden on June 9.
According to the draft resolution, the ceasefire proposal will be implemented in three phases. The first phase will implement an "immediate, complete, and total ceasefire," with Israeli forces withdrawing from all populated areas in the Gaza Strip; Hamas releasing some detainees, including women, the elderly, and the injured, and returning the remains of some victims; and Israel releasing detained Palestinians. In the second phase, Hamas will release the remaining detainees. In exchange, Israeli forces will withdraw completely from the Gaza Strip. The third phase will launch a large-scale reconstruction plan for the Gaza Strip, etc.
Israel has accepted the new ceasefire proposal, and Hamas has also welcomed the resolution.
US Ambassador to the UN Linda Thomas-Greenfield said, "Today, we voted for peace."
In March, China and Russia vetoed a Gaza ceasefire resolution, saying it would give Israel a green light to attack Rafah. Previously, the US vetoed three draft resolutions, two of which called for an immediate ceasefire.
This news hit safe-haven buying in gold, and also gold prices are under pressure.
The Federal Reserve will release its latest interest rate decision this week, along with updated quarterly economic forecasts, including the so-called "dot plot" of interest rate projections. After a series of rapid interest rate hikes last year, Fed officials generally believe that given robust economic growth and inflation still slightly above target, the best course of action is to maintain the status quo. In fact, after raising rates to their highest level in 20 years, they are using this summer to assess employment, spending, and inflation.
Since this week's meeting is not expected to bring major policy changes, the focus will be on the new quarterly interest rate projections, the so-called "dot plot." In March, most officials projected two to three rate cuts this year; the median projection of 19 officials was three rate cuts, but only just barely. This was followed by a third consecutive disappointing inflation report in the US, which subsequently led investors to doubt the Fed's ability to cut rates this year.
The new quarterly interest rate projections may also reveal potential divisions that have so far been masked by robust hiring and growth data. "Hawks" within the Fed, officials who are more concerned about high inflation, have not actively advocated for renewed rate hikes, but for now, they seem willing to abandon the idea of rate cuts this year.
On the other hand, "doves," officials who are more concerned that maintaining high interest rates will cause unnecessary economic weakness, believe that without better inflation news (including Wednesday's report), there will be little reason to push for rate cuts.
This could mean that September would be the earliest opportunity for a rate cut, unless the economy deteriorates significantly. While the "dot plot" may offer some clues, between now and then, with three more months of inflation, hiring, and spending data, it may be difficult for officials to send a strong signal from this meeting.
Looking at the gold daily chart, the Relative Strength Index (RSI) has fallen below 50, reflecting a strengthening bearish trend. Gold prices have broken below the 23.6% Fibonacci retracement level of $2320 per ounce from the uptrend since mid-February, as well as the $2300 per ounce psychological level.
In the short term, stronger support for gold prices is at $2260 per ounce. If gold prices continue to break below this level, it could trigger a new round of selling and fall towards the 100-day moving average of $2217 per ounce. On the upside, any recovery in gold prices would need to break above the 50-day moving average of $2343 per ounce. Looking further up, regaining the 21-day moving average of $2355 per ounce would be key to eliminating the recent bearish bias.
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Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.