Daily Market Recap – GOLD prices under pressure following Fed's announcements

The yellow metal has been under pressure since the Federal Reserve signaled on Wednesday that it intends to reduce its bond purchases soon and raise interest rates next year.

Specifically, the Fed said that “if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted.”

The central bank's projections for interest rate hikes also call for a rate increase as early as 2022, which could also reduce demand for precious metals.

In the absence of a short-term catalyst, gold may be more influenced by movements in the U.S. dollar, risk appetite, and rising bond yields. The yield on 10-year U.S. Treasuries rose sharply this week to 1.459%, still supported by the prospect of a gradual tightening of U.S. Federal Reserve monetary policy.

In short, as Fed officials continue to discuss monetary tightening, investors will be waiting for more visibility on their intentions before buying gold.

From a technical perspective chart, the price of gold this week was supported by a bullish oblique in place since March. Although the break of the trend line has weakened the long-term upward momentum, the yellow metal has entered a stabilization phase.

For several weeks, the market has been moving without a clear direction within a range between $1,830 and $1,750, so prices are at a crossroads.

Gold is currently trying to bounce off the lower bound. A further rotation of prices to the opposite boundary would therefore not be out of the question in the coming days. However, if the $1,750 support gives way to selling pressure, then the market should begin a deeper correction towards $1,690.

 (Chart Source: Tradingview 26.09.2021)

On the other hand, we will have to wait for the key pivot at $1,830 to be broken to restart the buying flow and the upward momentum. As a result, gold should continue to stabilize while awaiting the next directional flow that will be given on the break of one of the two range bounds. As such, traders may look to conservatively long the precious metal in this consolidation scenario with a near-term target of $1,760 barring a firm slip below 1,750 at the start of the week.

Support & Resistance Levels:

R3       1,827

R2       1,800

R1       1,767

S1        1,750

S2        1,732

S3        1,682

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.