Jun 08, 2023

Gold prices could fall further as it nears a critical support level, as we predicted last week.

Gold – Daily Chart

Gold – Daily Chart

Gold is trading around the $1,942 level after a failure at the moving average resistance and now faces a critical test of $1,930. Support below comes in at the $1,900 and $1,808 levels. 

The passing of the US debt ceiling bill would always take some wind from gold’s sail. Central bank buying has been a critical driver of gold. However, the political uncertainty drove us to the 2022 highs. 

Central Bank monetary policy has been a critical downside in recent days with bullish Fed officials and a surprise end to the Bank of Canada’s rate hike pause.

“There’s nothing out there on the surface that says gold should be positive… It’s a wait and see type of moment,” said Phillip Streible at Blue Line Futures in Chicago. 

The Bank of Canada raised its key interest rate by 25 basis points on Wednesday, ending a three-month pause, as the Canadian economy is hotter than expected. The latest move brings the central bank’s overnight rate to 4.75%, the highest level since May 2001. 

“Overall, excess demand in the economy looks to be more persistent than anticipated,” the central bank said. 

“Based on the accumulation of evidence, the Governing Council decided to increase the policy interest rate, reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the two percent target.”

Gold Price Prediction – XAUUSD

The US Federal Reserve meets next week and must decide on its next action plan. Some are expecting a pause from the bank at this meeting.

Richard Clarida, Pimco managing director and former Fed vice chair, told Bloomberg on Tuesday, “We could get an additional hike or two in this cycle.” 

“I think the bar for rate cuts for the rest of this calendar year is very high,” he told Bloomberg. “I do think if there are cuts, it’s really a 2024 story.”

Gold is set to test the $1,930 level, which could see a bearish sentiment continue to unfold.

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