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Gold has found support above $2000 aided by the belief the Fed will pause hikes soon

Commentaries & Views

Over the last 10 trading days, gold futures have effectively closed above $2000 per ounce. Although on an intraday basis, gold has moved below $2000 on three occasions, gold prices recovered and closed above $2000 on each instance.

On April 3, gold futures opened at $1990, traded to a high of $2007 and closed just at $2000 per ounce. On the following day, April 4 gold opened above $2000 and closed at $2038. This marked the first of 10 consecutive days in which gold closed above that critically important psychological level.

Market participants have been solidly bullish about gold based on the belief that the Federal Reserve could stop raising rates after the May FOMC meeting. The belief that the Fed will pause rate hikes after one final ¼% hike in May has ignited strong bullish market sentiment for gold pricing.

Because there is an intrinsic lag between rate hikes and the effect on contracting the economy the Federal Reserve will need to pause at some point to gauge the outcome of raising rates at every FOMC meeting since March 2022.

This optimism has pressured the dollar and yields lower and concurrently moved gold futures above $2000 per ounce. Recent volatility and diminished bullish market sentiment for gold have been in response to Federal Reserve officials who continue to reiterate the need for taking interest rates higher. Last week Fed Governor Christopher Waller said that the Federal Reserve needs to continue raising interest rates because of the high level of inflation. Reuters posted an interview today with St. Louis Federal Reserve President James Bullard who also underscored the need for higher U.S. interest rates to combat inflation

Market participants will continue to focus on more comments from Fed officials this week before the Feds standard blackout period that will begin on April 22, ahead of the May FOMC meeting.

As of 5 PM EST gold futures basis the most active June 2023 contract is up $10.80 and fixed at $2017.80. Spot gold has moved back above $2000 and is currently up $9.91 and fixed at $2004.80.

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Wishing you as always good trading,

Gary S. Wagner

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