Investors continued to re-evaluate its position in the metal, taking into account the statements made US Federal Reserve. Gold prices rose from the beginning of this year, while the prices of raw materials and stock indices fell. Some investors have begun to fear that the weakening world growth may cause the Fed to delay raising interest rates in the United States that must occur for the first time since 2006.
However, after the statements made by the Fed, investors are beginning to believe that the pace of rate hikes will mainly depend on the US economic data, which generally showed a steady increase in recent months. This has undermined the case for owning the metal.
In addition, the Fed's comments pushed the dollar to new highs against other currencies. This made denominated in US currency gold more expensive for foreign buyers. The prospect of higher interest rates also had a negative impact on the gold market, which does not pay dividends or interest income and hardly competes with investments yielding interest when borrowing costs rise.
As a result, the metal sharply went down on Thursday and reached the support area of 1255.00 dollars per ounce. From a technical point of view, the ability to hold above this support, where the 200-day SMA, will determine the future prospects of the metal. If he stay above 1255.00, followed by a reverse trend reversal up and a new attempt to rise above the resistance level of 1300.00 1345.00 1400.00 and.
At the same time, consolidation below 1255.00 support worsen the prospects for gold, opening the way towards reducing the level 1200.00. As a secondary supports may make the 50- and 100-day SMA.
Fig. 1. The daily chart
Eduard Kovalenko, analyst of company Admiral Markets