Will Gold price continue to fall after FED verdict?
The metal seen its highest level on May 20, gaining momentum on US rate cut expectations following the Bank of Canada and the European Central Bank’s rate cuts.
However, the gold prices lost over 6% since then, on the back of a higher dollar and further delay in rate cut expectations.
Will gold price decrease in the coming days following the latest FED signals?
Triggers for gold price correction
China, a major player in the gold market, paused gold buying in May. Additionally, the robust US nonfarm payroll report of May gave the Fed room to postpone rate cuts.
The robust jobs data led to a dollar rally, making gold more expensive for foreign buyers, despite earlier gains driven by weaker private payrolls data and expectations of a Federal Reserve rate cut.
Indeed, The Fed decided to hold rates steady as expected on its June meeting but signaled that it now expects to cut rates just once in 2024 rather than the three times it had previously forecast.
Fed Chair Jerome Powell reiterated at the post-meeting press conference that the central bank will not cut rates until it sees more data showing that inflation is cooling.
Experts suggest now that gold prices will likely continue declining, pressured by vital US jobs data and a halt in Chinese bullion purchases.
Gold price prediction
Gold is potentially forming a bearish Head-and-Shoulders (H&S) price pattern. These patterns generally occur at market tops and signal a change of trend. If the H&S is valid it may be an indication that the medium-term bull trend is reversing.
The H&S pattern began forming in April and has now completed a left and right shoulder (labeled “S”) and a “head” (labeled “H”). The so-called “neckline” of the pattern appears to be at the $2,279 support level (red line).
Declining trade volume during its development corroborates the pattern.
A decisive break below the neckline would validate the H&S pattern and activate downside targets. The first, more conservative, target would be $2,171, calculated by taking the 0.618 Fibonacci ratio of the height of the pattern and extrapolating it lower from the neckline. The second target would be at $2,106, the full height of the pattern extrapolated lower.
A break above $2,345, however, would bring the H&S into doubt and could signal a continuation higher, to an initial target at the $2,450 peak.
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