Gold Falls Below Resistance As US Bond Yields Surge Prior To Fed’s Meeting

As FOMC will hold its regulatory meeting on Wednesday there are rumors the Feds will increase the interest rate by 25 basis. Following this news, the USD and US Treasury yields surpassed the current levels of resistance.

2022 was arguably the worst-ever year for U.S. bonds. However, 2023 has turned out to be a different year for US bonds.

The final decision of the Fed will only be announced during the press conference once the meeting will be finished.

As of this writing, pressure is mounting on the Feds to increase the interest rate to stay protected against inflation.

In case the interest rate goes higher, this would benefit the USD and further strengthen the US bond, but it will harm the stocks as well.

Gold Already Falls Behind the Resistance Level

The strong rumors that the Feds are most likely to announce the increase in interest rate have already slowed down the gold’s performance in terms of price.

However, FOMC’s final decision will decide the price of the gold. The Fed’s chair Jerome Powell most likely to force a hike in the interest rate. This will decide the future of the US dollar.

On Tuesday 31st January the USD index was higher as compared to the previous day’s index. On the other hand, Euro was weaker today.

DXY exploited the situation at the right time and benefited from the situation. Talk of the GBP, it was on a weaker footing after IMF announced a further economic crisis for the U.K

Gold is Unable to keep up with the Level of Resistance

Talk of Gold, the metal failed to keep up with the recent levels of support and fell short. However, it might still touch the $1,900/oz mark before the final announcements of the Feds.

A look at the current price pattern of Gold shows that the metal is significantly weak at this moment in time.

Since touching the peak at $1,615/oz back in November 2022, Gold until now has gone only one way.

On the flip-side retail traders have opted to go long on Gold price, as of this writing, 55.32% of the retail traders have opted to go for net-long on Gold.

There is a 4.18% increase in the traders who decided to go long as compared to yesterday. Talking of the current market sentiment, the current consumer sentiment about gold is negative.

Retail traders going long on gold suggest that the price of gold may continue to go down. Moreover, the market trends also show a mixed trading bias towards the trade of Gold.

But, if Feds decided to announce the increase in the interest rate this will surely send the gold price further down.

In case the economic indicators suggest that it is nearly impossible to avoid the economic recession and chances for growth have faded, the gold price can get benefit from this situation.

In contrast to gold, USD, and US bond yields are perfectly positioned to go beyond the level of resistance and grow further strong.

Talk of commodities, as of now, crude oil and gold both are bearish. In currencies, Euro and GBP both are bearish.

The market volatility and intensity of supply and demand are the important factors that decide the price of Gold.

This means rising interest rates will give rise to the U.S. dollar, but it will push gold prices further lower.

Talking of the gold traders, the current circumstances are not favorable to trade gold. Gold and interest rate have a negative correlation.

So, if you are interested in exploring the Forex market and looking forward to investing in commodities, you should avoid buying and selling gold as the timing is not right.

On the other hand, when all the major currencies are falling apart, it is the perfect time for you to invest in USD and US bond yields.