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  • The Federal Reserve Bank suggests a rate hike at next meeting but didn’t sound too much upbeat.  
  • The yellow metal bounces to $1,294 a troy ounce after the report.

Gold found an intraday high at 1,298.50 in early European trading then sharply reversed down to trade below the 1,290.00 handle in the first part of the American session. It bounced above 1,290.00 on the FOMC’s minutes. It is currently trading at around $1,294.00 a troy ounce up 0.27% on Wednesday.  

The FOMC’s minutes said that a rate hike is likely at the next meeting and allowing for a modest “overshoot” on inflation may be good. The Fed mentioned they are “monitoring the yield curve” and that “inflation on a 12-month basis is expected to run near the Committee’s symmetric 2% objective over the medium term. Risks to the economic outlook appear roughly balanced.”  

However, the report says that the Fed will be rather data dependent and didn’t sound in a great rush to raise rates. “The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data, “ as per the Minutes of the Federal Open Market Committee.  

Looking back, earlier in Europe Gold traded up as the stock indices in Europe and USA were in risk-off mood. Remarks by the US President Trump on the lack of progress between US and China concerning the trade war coupled with the possibility that there is a “substantial chance” that the meeting with the North Korean Leader, Kim Jong-un originally scheduled for June 12 in Singapore might not take place, sent global stock indices lower and gold higher. However, in early American trading, the metal had a sharp reversal as it almost hit the 1,300 psychological level and dropped nearly $10 in about four hours.

Gold technical outlook:

The main trend is bearish as the market is trading below its 50, 100 and 200-period simple moving averages on the 4-hour chart and below the key psychological level of 1,300. Supports are seen at the 1,285.00 handle, 1,281.70 swing low and at 1,270.00 figure while resistances are seen at 1,296.92 swing high and at the 1,300.00 figure.