The recent statements made by the Chair of the US Federal Reserve, Jerome Powell, have led to a slight decrease in the value of gold, rendering it susceptible to a potential breach of its crucial support level.
The price of gold has been maintaining a position above a crucial level of support. A recent publication from June 8th suggested that gold may not be ready to decline below this support. Nevertheless, the recent testimony given by Powell to the House Financial Services Committee may have made it easier for gold to experience further weakening.
XAU/USD 240-minute Chart
Powell reiterated his hawkish stance, stating that it is reasonable to assume further increases in interest rates. He clarified that the pause in June did not indicate a halt in the hiking cycle and maintained the forecast for two additional rate hikes by the end of 2019.
Atlanta Federal Reserve President, Raphael Bostic, has expressed that the Federal Reserve will require additional time beyond their July meeting to determine any potential increases in interest rates. Although Bostic’s remarks were marginally cautious, it is probable that this announcement will affect the direction rather than the rate of future hikes, resulting in continued pressure on gold prices.
XAU/USD Daily Chart
The shift in direction from an upward to a downward trend, as indicated by the 89-period and 200-period moving averages on the 240-minute charts, suggests a developing trend despite the minimal movement of XAU/USD in recent weeks. The yellow metal has been unable to surpass the two moving averages and with lower lows, it is more likely to see a decline in the short term.
XAU/USD Weekly Chart
Gold is currently maintaining a strong support level around 1930 on the daily chart. This support level includes several key indicators such as the end-May low, the 89-day moving average, and the lower boundary of the Ichimoku cloud. If this support level is breached, there is a possibility that gold may decrease to the 200-day moving average at approximately 1850. In order for the immediate downward pressure to be alleviated, gold would need to increase above the range of 1970-1985.