Spot Gold Dips Below $2310 Amid Fed’s Hawkish Tone

On Thursday, spot gold prices in the Asian market dropped, dipping below the $2310 mark and hitting a low of $2308.03 per ounce, down about $16 from Wednesday's closing price. Analysts attribute this decline to hawkish comments from Fed Chairman Jerome Powell.

FXStreet analyst Christian Borjon Valencia pointed out that gold's technical picture shows a head-and-shoulders pattern, suggesting further declines. Gold prices have been highly volatile since Wednesday's New York session. Following the release of the U.S. CPI data, spot gold surged from below $2,315 per ounce to a high of $2,341.67 per ounce. However, after the Fed's resolution, gold prices fell sharply from the $2,335 level and continued to decline after Powell's press conference, closing Wednesday at $2,324.73 per ounce, up 0.34% intraday.

The Federal Reserve, for the seventh consecutive time, kept the federal funds rate target range unchanged at 5.25% to 5.50%, in line with market expectations. The post-meeting statement indicated steady economic activity, strong employment growth, and a low unemployment rate. Although inflation has slowed, it remains high, with modest progress towards the Fed's 2% inflation target.

Fed officials' projections for rate cuts this year have changed, with four officials now expecting no rate cuts, up from two in March. Seven officials expect one rate cut, while eight expect two, indicating that the base case is no more than one rate cut this year.

At the press conference, Powell noted significant economic progress but emphasized that inflation remains too high. He reiterated the need for more confidence in inflation data before considering rate cuts and maintained a tight monetary policy stance.

Analyst Enda Curran commented that Powell carefully managed expectations, avoiding any clear signal of a rate cut in September and emphasizing a data-driven approach.

According to FXStreet's Valencia, gold maintains a neutral to downside bias after forming a head-and-shoulders pattern. If gold prices fall below $2,300 per ounce, the next support areas are the May 3 low of $2,277 per ounce and the March 21 high of $2,222 per ounce. Further declines could target the head-and-shoulders pattern range of $2,170-2,160 per ounce.

Conversely, if gold prices climb above the June 7 cycle high of $2,387 per ounce, it would negate the head-and-shoulders pattern and potentially open the way for a test of the $2,400 per ounce mark.