Gold prices fell by 0.19% on Thursday, retreating as the US Dollar strengthened. The drop came after the Federal Reserve’s recent policy decision and rising tensions in the Middle East. The price of gold (XAU/USD) stood at $3,042, marking a slight decline as market sentiment turned negative.
The US Dollar Index (DXY), which tracks the dollar against a basket of six currencies, rose as the Greenback regained strength. Gold traders struggled to push prices higher, despite the Fed’s decision to keep interest rates unchanged at 4.25%-4.50% for the second consecutive meeting. The Fed also announced a slowdown in its quantitative tightening efforts.
Federal Reserve officials acknowledged the resilience of the labor market but pointed out persistent inflation concerns. They revised their forecasts for interest rates, economic growth, inflation, and unemployment. The Fed now expects two rate cuts in 2025, a lower GDP growth forecast, and rising inflation and unemployment.
Fed Chair Jerome Powell took a neutral stance, noting increased uncertainty regarding the economic outlook. He highlighted the impact of certain trade policies under President Donald Trump, which had contributed to higher prices and slower growth. Powell also emphasized that the current policy stance was well-positioned to manage risks and uncertainties.
Meanwhile, tensions in the Middle East escalated with ongoing Israeli airstrikes on Gaza, resulting in at least 91 Palestinian deaths and numerous injuries, according to Reuters.
Market Movers and Economic Data
The US 10-year Treasury yield remained relatively stable, dipping slightly to 4.183%. The US Dollar Index rose by 0.34% to 103.80, while real yields, as measured by the 10-year Treasury Inflation-Protected Securities (TIPS), remained almost flat at 1.904%.
The Fed’s latest economic projections showed an expectation for two rate cuts in 2025, while the inflation gauge, PCE Price Index, and the unemployment rate were revised higher. The GDP growth forecast was lowered to below 2%, reflecting concerns over the impact of trade policies from the previous administration.
Jobless claims for the week ending March 15 rose slightly to 223,000, still below the expected 224,000, indicating a resilient job market. However, manufacturing activity slowed, as the Philadelphia Fed Manufacturing Index dropped from 18.1 to 12.5 in February.
The money market now anticipates 69.5 basis points of rate cuts from the Fed in 2025, which has contributed to falling Treasury yields and a weaker US Dollar.
Gold’s Technical Outlook
Despite the recent dip, gold’s long-term trend remains bullish. However, a potential pullback is expected as a Doji candlestick pattern suggests consolidation before a resumption of the upward rally.
The Relative Strength Index (RSI) remains in overbought territory but is set to dip slightly as traders take profits. The first support level for gold is $3,000, with further support at $2,954 and $2,900. If gold breaks above $3,050, it could test the $3,100 mark.
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