By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
The most important event this week was the FED meeting. As the Fed maintains hopes for at least one rate cut this year, precious metals investors consider the inflation picture. The gold and silver markets have just reversed some of their significant gains this year. So far, it appears to be a normal correction following a major surge.
On Wednesday, the Federal Reserve kept interest rates steady, as predicted. Fed members admitted that inflation remains too high, despite recent CPI data indicating minor ease in price pressures for the first time in months.
The FOMC meeting in June demonstrates that Fed Chair Powell is eager to begin reducing rates. However, he is unable to do so much due to the strength of the headline NFP data and sticky inflation, which remained at 3.3% year on year in May, well over the 2% objective. Indeed, the Fed lifted its favourite inflation index, core PCE, to 2.8% at the end of the year, up from 2.6% at the previous meeting—still far above the goal.
The CME FedWatch Tool reveals that markets are pricing in a roughly 70% chance of at least a 25 basis point rate cut in September. If Fed officials deviate from market expectations of a policy shift before the end of the year, US Treasury bond rates may rise, making it challenging for Gold to remain stable. On the other side, gold is expected to draw buyers if policymakers go for two rate cuts in September and December.
Technically, Gold has very important support at $2300 and resistance at $2355. Prices need to break this range for the next move. While Silver has strong support at $29 and resistance of $30, sell-on rallies should be the strategy used for the target of $28.5.
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