The uncertainty on further easing by the Federal Reserve increased after the central bank’s tone came not as dovish as expected. Powell’s rhetoric fueled a widespread dollar rally which sent gold prices lower on Wednesday. The precious metal extended losses to $1,404 today, with the futures are now threatening the $1,4000 handle.
As investors priced in a softer tone from the FOMC, market participants were disappointed despite the Fed cut its interest rate as the central bank did not indicate if it would cut rates by another quarter percent point in September. Moreover, Powell sent some mixed signals to markets. He highlighted that this was not the start of a long easing cycle but was not not just a one-and-done cut either.
Against this backdrop, the yellow metal will likely remain vulnerable to further losses at least in the short term as the greenback may continue to appreciate across the board. Technically, the downside risks will increase should the bullion challenge the $1,400 psychological support. In the hourly charts, the prices need to get back above the 100- and 200-SMAs in the $1,422 region.