Gold prices pulled back on Monday as the dollar stabilized. But discussions about the US debt ceiling and less hawkish comments from Fed Chairman Jerome Powell prevented further losses under the safe-haven. On the crypto front, Bitcoin continues to trade below $27,000. In this environment, FED minutes will be in the focus of investors, as they will provide clues about the Fed’s outlook.
Gold more affected by debt ceiling developments
US President Joe Biden and Republican Speaker of the House of Representatives Kevin McCarthy will meet on Monday to discuss the debt ceiling. It will be watched closely whether a solution can be reached after talks break down on Friday. Matt Simpson, senior market analyst at City Index, comments on the impact on the markets as follows:
Gold is more affected by debt ceiling developments than the Fed meeting. Because before the Fed’s next meeting, it may be possible for the USA to default. This will definitely have an impact on the Fed’s decision.
Gold likely to exceed $2,000 before rebound
Fed Chairman Powell said it was still unclear whether U.S. interest rates would need to rise further. The fact that inflation is difficult to control still stands out. Meanwhile, uncertainty about the impact of recent bank credit tightening is still here. Amid all this, gold prices gained 1% on Friday.
According to the CME FedWatch tool, markets are currently pricing in an 87.3% probability that the Fed will hold interest rates steady next month. According to Reuters technical analyst Wang Tao, it is possible for gold to break the resistance at $1,985. Thus, it is likely to rise to the $1,992-2,003 range before reversing and falling.
Gold justifies its haven status as FED Minutes loom
The gold price has been taking advantage of the market uncertainty regarding the extension of the US debt ceiling lately. This may be due to the lack of an important statement from US policy makers. Meanwhile, Fed Chairman Jerome Powell highlighted inflation fears on Friday. However, he also noted that the recent banking crisis, which has led to tighter credit standards, has eased pressure to raise interest rates. The same situation weighed on the hawkish Fed bets, giving the US dollar bulls a sigh of relief. As you follow on Kriptokoin.com, this also supported the recovery of gold before important data/events.
Along the same lines, Minneapolis Fed Chairman Neel Kashkari ruled out market expectations that the Fed has finished raising interest rates in an interview with the Wall Street Journal (WSJ). The policymaker also said he would support the Fed to keep interest rates steady at its next meeting.
It’s worth noting that the market has recently increased bets on a 0.25% Fed rate hike in June, and calls for rate cuts in 2023 have dwindled, due to the optimistic US economy last week and hawkish comments from Fed officials. As a result, the gold price fell last week except to witness a bounce on Friday. Also, the fear of US default is helping gold.
Technical view of gold before Fed Minutes
Technical analyst Anil Panchal analyzes the technical outlook for gold as follows. Despite its second consecutive weekly loss, gold has been on the rise in recent days, closing positive on Friday. However, the gold price managed to recover from the oversold zone. Therefore, it also takes cues from the Relative Strength Index (RSI) line at 14. Also, bullish signals are coming from the Moving Average Convergence and Divergence (MACD) indicator. This adds strength to the upward trend.
However, it is worth noting that the 13-day descending resistance line near $1,998 came before the 200-bar Simple Moving Average (SMA) near $2,005 at press time to constrain gold’s short-term upside movement. Following this, the previous support line around $2,016-17 mid-March is the key that gold buyers must cross to regain control. Still, April highs of $2,049 and the rounded figure of $2,050 have the potential to impact gold higher before leading metal buyers to the previous-year high of around $2,070 and the recently glowing record high of $2,080.
On the other hand, $1,950, the last week’s low, holds the key to the entry of the golden bears. Even so, it’s possible that the 50.0% and 61.8% Fibonacci retracement levels of gold’s rise from March to May could act as an extra filter to the south, around $1,943 and $1,911, respectively. Overall, a short-term recovery is possible. However, gold remains on the bears’ radar below $2,017.
Gold finds good support around $1,950
According to preliminary data from CME Group, the number of open interest in the gold futures markets continued its downtrend on Friday, dropping more than 1,000 contracts. Volume, on the other hand, increased by 3.5 thousand contracts in the second session in a row.
Reasonable increases in gold prices on Friday took place in an environment where the downward trend in open interest continues. This shows that a sustained recovery is not possible for now, according to market analyst Pablo Piovano. Meanwhile, the analyst says that the 1950 dollar zone has emerged as a solid support for gold.
What’s next for Bitcoin?
Technical analyst Brian Bollinger looks at the technical outlook for Bitcoin before the Fed Minutes. Bitcoin price is trading at $26,872, with an intraday gain of 0.26%. Thus, BTC continues to approach the top of the triangle formation. Therefore, Bitcoin price is poised for a significant breakout from any of the converging trendlines. This will then predict potential price action.
A breakout from the general trendline in the bullish direction is possible. It is also possible that this will push the price up by 7-6%, hitting the downward trendline of the channel formation at $28,000. Bitcoin price needs a real breakout from the channel pattern to break above $30,000.
Conversely, a 4-hour candle closing below the triangle support will drop prices by 5-6% this week, reaching the lower trendline of the channel formation around $25,000. Therefore, the Bitcoin price is currently sitting in a no-trade zone. Interested traders should wait for a triangle breakout before entering a new position.
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