Gold Clocks New Peaks Post Fed Hike as Oil Collapse Rattles Markets. Higher XAU/USD?

Gold, XAU/USD, FOMC, Fed Rise, US Dollar, Crude Oil, WTI, Powell, Yields – Talking Points

• the gold price It launched north into the open today but has since retreated
• the U.S. dollar Treasury yields fell as markets eyed lower rates
• The Fed’s decision has come and gone, but there could be more ramifications for XAU/American dollar

Gold rallied higher after the North American close for the day at the same time that the price of Crude Oil fell significantly. The moves come after the Federal Open Market Committee (FOMC) raised its target interest rate by 25 basis points to 5-5.25% yesterday.

The US dollar closed lower against all of the G10 currencies on Wednesday, which could support the yellow metal. Commodity-linked currencies such as the Australian dollar, Canadian dollar and New Zealand dollar on Thursday started in full swing which may reflect the large swings in gold, oil and other commodities.

Live prices for these markets can be found here.

Comex gold futures front touched $2085.4 an ounce today. This is the highest level since August 2020’s all-time high of $2,089.2.

Although it has surpassed the March 2022 high of $2,078.8, the Triple Top is now in play unless a new high is made. The triple top is an extension of the double top.

Comex gold futures, which are priced at bbl crude oil futures in New York, are trading at their highest level since February 2021.

After Thursday’s opening flurry, both gold and oil fell to levels close to where they closed on Wednesday as markets reset after the Federal Reserve hike.

Interest rate markets seem to be calling for the Fed’s bluff with pricing cuts as early as the third quarter. The market seems to have focused too much on the hub in some languages.

“The committee anticipates that some additional policies may be appropriate,” the March meeting statement read, before going on to cite factors that will be evaluated in the decision-making process.

The May meeting statement changed this passage to, “In determining the extent to which additional policy fixation may be appropriate.”

This seems to have been the market’s impetus not to see further hikes and to anticipate cuts in the future. In post-match press, Fed Chairman Jerome Powell emphasized that this is not necessarily the case.

He noted several times that every decision moving forward would be data-driven on a meeting-by-meeting basis and required continuous evaluation.

However, Treasury yields fell again as the two-year note touched 3.81%, notably below last month’s peak of 4.29%.

Real yields continue to ease with the 10-year rate near 1.15%, down from a high of 1.38% seen Monday. The real yield is the nominal yield minus the market price inflation rate derived from Treasury Inflation Protected Securities (TIPS) for the same duration.

Not surprisingly, gold’s volatility rose in the frantic price action. The GVZ measures volatility in gold in the same way that the VIX measures volatility in the S&P 500.

The price of gold in US dollars and oil, the US 10-year real return, the volatility of gold

Chart created in TradingView

– By Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @employee on Twitter