The FED is walking on a narrow edge


The FED is walking on a narrow edge, which is making equity investors very nervous; however, the gold market continues to perform well in such volatile waters. Year-to-date, the broad stock market indexes are down nearly 20%. In contrast, the gold market is roughly neutral on the year and is clearly outperforming equities. Investors have been selling stocks as inflation erodes corporate profits. At the same time, the FED is looking to cool inflation by slowing down the economy through aggressive rate hikes which raises fears about possible recession. The gold market continues to face challenging headwinds from the U.S. dollar; however, gold is once again seeing renewed investor interest as a safe-haven asset. Many investors are asking if gold's bounce last week is an indication that the precious metal has found a floor around $1,780. If the U.S. dollar and equity markets continue to decline, gold prices are likely to rebound further. In the short-term, from technical analysis perspective, the correction from the March 8, 2022 high of $2,070 has retraced close to its previous multiple support of $1,780 where strong buying interest emerged last week. The current short-term rally rebounded to its previous resistance of $1,858 which is an important level to monitor in the very short term. A break above this level would signal an extension of the rally to $1,865 and possibly higher over time. Should the bears manage to push the price below minor support of $1,848 a decline to $1,840 could unfold intra-day.

24 views0 comments