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Gold – Fed rate hike talks hurt

FX:XAUUSD   Gold/U.S. Dollar
Resistance - $1218.75, $1232, $1246

Support - $1209.84, $1200, $1191.53

  • Gold’s bullish price RSI divergence followed by a break above hourly 50-MA indicates doors remain open for a test of supply around daily 50-SMA of $1218.75 levels.
  • However, resistance at $1218.75 is likely to stay intact with re-test of $1200 levels seen likely in case prices dip below Asian session low of $1209.84 levels.
  • Daily RSI is still few points away from oversold territory, indicating a re-test of $1200 is likely if prices break below Asian session low.

Yellen hinted at a possible rise in June or July on Friday and that triggered a drop in the yellow metal to $1200 levels.

Investment demand is the primary determinant for the metal price. Gold             needs to be looked at as a hard currency and not a metal. That makes it clear why prices rallied in Q1 – given the falling Fed rate hike bets and negative rates in Japan and Euro             zone. Only a rise in interest rates could hurt gold             , although resulting risk-off in equities could cap losses. As of now, financial markets are quite steady, thus rising Fed rate hike bets are hurting gold             .
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