Gold prices dropped sharply after the US Federal Reserve projected rate hikes into 2023. Gold is currently trading near $1809 which is sharply lower than the recent high of $1919.20 registered on June 1. The FOMC had signaled two interest rate hikes by the end of 2023 even as officials in their statement pledged to keep policy supportive for now to encourage an ongoing jobs recovery. Fed announced to continue to buy $120 billion in bonds each month to fuel the economic recovery.
Fed Chair Jerome Powell said in a press conference that Fed policy would continue to deliver “powerful” support to the economy and flagged concerns over the economic recovery. He also said inflation could turn out to be higher and more persistent than expected.
On the economic data front, US May housing starts rose +3.6% m/m to 1.572 million, against expectations of 1.630 million. US May building permits fell -3.0% m/m to a 7-month low of 1.681 million, against expectations of 1.730 million.
The US May import price index rose +11.3% y/y, against expectations of +10.9% y/y and the fastest pace of increase in 9-1/2 years. China's May industrial production rose +8.8% y/y, against expectations of +9.2% y/y.
However gold prices found some support from dovish comments from ECB Vice President de Guindos. He said the winding down of ECB pandemic stimulus "will have to be done gradually and with prudence, because we can't cut short the economic recovery that is underway."
According to the CFTC Commitments of Traders report for the week ended June 8, net long for gold futures slipped by 4314 contracts to 209387 for the week. Speculative long position dropped by 45 contracts, while shorts were added by 4269 contracts.
Gold prices are likely to trade negatively while below the key resistance level of 50 days EMA at $1846 and 100 days EMA at $1833 while immediate support level could be seen around $1790 and $1763