Gold Analysis ahead of FOMC and Retail Sales $1850 on the card? There will be two major news will be released in the market today, both of which will have a significant impact on the price of gold.
During the first half of the American session, the Retail Sales Report will be released, and the FOMC will release its report after its conclusion during the second half of the American session.
The Federal Reserve will raise interest rates today; a 25 BP rate hike is already priced in the market. So, I don't think this will help the USD a lot against the gold. The big draw of today's FOMC meeting is how aggressively FED delivers their statement and what they are thinking of changing their dot plot.
From the dot plot, we will learn about the long-term interest rate and how many times they want to increase their bank rates. According to the statement, the more aggressive it is, the more gold will be devalued.
This is the first time the Federal Reserve is hiking bank rates since the outbreak of the Pandemic. Bear in mind that simply boosting a currency's interest rate does not make it stronger; instead, its monetary policy is more significant than whether the rate is raised or lowered.
As a result, there is no reason to believe that gold will fall in value if the Fed raises interest rates. If FED delivers a dovish hike, then gold will rise.
I believe that gold will gain strength during today's retail sales report, which will be released starting at the US season. In that circumstance, it is more possible that gold will test the level of 1940 first.
Moreover, if the retail sales report prints below expectations, gold is more likely to test the $1950/1960 price zone.
Now, what is it that the FOMC might do?
I think FED will deliver a dovish rate hike to balance the economy and market. If FED delivers a hawkish rate hike, gold will be too weak than the dollar, and the USD will be too strong. A too-strong currency is detrimental to the economy because it hurts exports. So, I think FED won't take these risks.
Moreover, FED may deliver a dovish rate hike. In that case, gold may fall first and test the $1900/1885 price zone.
But if the United States wants Russia to be more disciplined in all aspects of its behavior, the Federal Reserve will raise the Hawkish interest rate. In that instance, gold may test the $1850 rice zone.
Gold's Technical View
Gold stays below the trendline support. So, technically gold is more likely to drop again with a slight correction to the upside nearly $1940/1950.
The current gold rate has immediate support in the $1907 price zone. If gold breaks the $1907 price zone, then our 1st target will be the $1890 price zone, and if it breaks $1890, the final target will be the $1850/1855 price zone.
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