Gold Futures (GC) Remain Supported by Risk-off Sentiment

  • Gold futures (GC) saw a dip below $1,900 on Wednesday.
  • Fed’s rate hike plan keeps the dollar-dominated gold under pressure.
  • Negative risk sentiment may keep the losses limited.

Gold futures (GC) prices remained in a tight range on Tuesday. However, the price dipped below the $1,900 level and broke the previous monthly lows of $1,890.

Although the precious metal is slowly recovering, the outlook remains strongly bearish as the US dollar dominates the market.

Fed’s 0.50% rate hike plan

The Fed Chair Jerome Powell reinforced the plan to hike half a percent rate in two upcoming meetings. He reiterated this plan in his testimony at IMF and the markets seem to have priced in the Fed’s hawkishness.

Gold continues to remain under pressure as the US dollar index posts multi-year highs above 102.00. The index is looking to mark a fresh 5-year high around 103.89 area.

DXY monthly chart
DXY monthly chart

Risk-off sentiment

The global risk sentiment remains poor as the recent Covid restrictions in China create a fear of global economic growth slowdown. On the other hand, global inflation has become another challenge to be curbed.

Apart from economic challenges, the geopolitical tension stemming from the Russia-Ukraine saga also negatively impacts investors’ risk sentiment. Recently a Russian Parliament speaker urged the Russian government to ban the energy supply to unfriendly countries. Moreover, the Russian authorities have been eager to halt the supply of Poland and Bulgaria if they do not pay in rubles.

On the other hand, German Minister of Economy, Robert Habeck, said they were looking for an alternative to Russian energies as the EU is looking to embargo the Russian oil imports.

Hence, the flows to safe-haven assets keep the losses in gold futures limited.

What’s next to watch for gold futures (GC)?

The US economic docket has two main events on the day to watch. They are the March trade balance and pending home sales data. Meanwhile, ECB President will speak later today which may also impact the gold prices. However, risk headlines remain the key market driver.

Gold futures (GC) daily open interest

Gold Futures (GC) daily open interest
Gold Futures (GC) daily open interest

Gold futures (GC) price rose slightly yesterday, while the daily open interest also rose a bit. Hence, it shows a minor bullish bias.

Gold futures (GC) technical analysis:

Gold Futures (GC) 4-hour chart
Gold Futures (GC) 4-hour chart

The 4-hour chart shows a pin bar candle, indicating a potential for bullish trend reversal. However, the price is still well below the 20-period SMA (green line). Therefore, bulls need a candle close above the 20-period SMA to confirm the reversal.

Alternatively, the bears need acceptance below the $1,890 (broken support) to further continue the downside.