Gold Price Forecast: A Strong Dollar and Fed Chair Powell’s Testimony Loom
The gold price tumbled sharply on Tuesday as the US dollar strengthened and traders awaited the testimony of Federal Reserve Chair Jerome Powell to Congress.
The dollar index, which measures the value of the dollar against a basket of other currencies, rose to a two-week high on Tuesday, making gold more expensive for buyers holding other currencies.
Gold is also sensitive to interest rates, and traders are expecting the Fed to raise interest rates by 25 basis points at its meeting next week. A higher interest rate environment could make gold less attractive to investors, as it would offer a lower return on investment.
Powell’s testimony on Wednesday and Thursday will be closely watched by traders for any clues about the Fed’s future monetary policy plans. If Powell sounds more hawkish than expected, it could send the dollar higher and weigh on gold prices.
On the technical side, gold is trading below the 200-day moving average, which could signal further weakness in the near term. However, if gold can break above the 200-day moving average, it could signal a short-term rebound.
Overall, the gold price is likely to remain under pressure in the near term due to the strong dollar and expectations of higher interest rates. However, if Powell sounds more dovish than expected, or if there is a significant sell-off in the stock market, gold could see a short-term rebound.
Here are some key factors to watch:
- The dollar index
- US interest rates
- Powell’s testimony to Congress
- The stock market
Conclusion
The gold price is likely to remain under pressure in the near term due to the strong dollar and expectations of higher interest rates. However, if Powell sounds more dovish than expected, or if there is a significant sell-off in the stock market, gold could see a short-term rebound.