Gold eases away from 9-month high
Spot gold has been pulled back slightly after the stronger-than-expected US GDP data dampened hopes that the Fed can turn less hawkish in the near future.
The resilience shown in the world’s largest economy may pave the way for the Fed to persist with its ultra-aggressive stance in its battle against inflation.
Gold’s pullback isn’t just due to the slight rebound in the US dollar and in US yields, but also because of technical factors.
Bullion has cleared some of the froth in prices, with its 14-day relative strength index now back below the 70 threshold which denotes “overbought” conditions.
Such price action however may have cleared more room to the upside, depending on how markets react to the Fed’s incoming clues next week.
Policy signals from the upcoming FOMC meeting may either validate gold’s recent gains or greatly disappoint bullion bulls.
If the Fed signals its persistence to send its benchmark rates past the market-forecasted 5%, that may unwind some of the precious metal’s year-to-date advances and drag it back closer to the psychologically-important $1900 mark.
Should the Fed’s policy bias align closer to market expectations that peak US rates may be at hand, that should encourage bullion bulls to resume their hunt for $2k gold over the near term.
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