By Bhavika Patel
Gold price hit fresh all-time high in MCX after FOMC statement deemed not too hawkish. The Federal Reserve maintained its monetary policy unchanged at the recently concluded Federal Open Market Committee (FOMC) monetary policy meeting, as anticipated. It seems that the FOMC statement took a moderate stance on policy, neither being very dovish nor overly hawkish. According to the statement, the US economy is expanding and while inflation has decreased, it is still high.
Also, rate reduction won’t happen until the Fed is more confident that inflation has subsided. Most importantly, the statement said the Fed sees three interest rate cuts this year. The central bank’s updated interest rate forecast, also known as the “dot plot,” shows the committee sees the Fed Funds rate ending the year at 4.6%, unchanged from December. As investors begin to solidify their views of a rate drop in June, the gold market has surged. The CME FedWatch Tool indicates that markets currently project a possibility of a cut in June of more than 60%. Prior to the announcement, the markets were factoring in a 50/50 possibility.
Although the central is still on track to cut rates this year, the impending easing cycle could be shallower than markets expect. The updated projections show that the central bank expects interest rates to end 2025 at 3.9%, up slightly from 3.6% reported in December. Interest rates are expected to end in 2026 around 3.1%, up from the previous forecast of 2.9%. Gold is trading at an all-time high in MCX so clearly one should not chase price at such elevated levels. Gold once again is trading in the overbought zone as RSI_14 is trading around 77 and we have seen prices correcting whenever RSI_14 hovers near 80. So in the very short term, there is limited upside and fresh positions should be kept in check and wait for any correction to go long. 65500 seems to be good support for taking long positions with a stoploss of 65000 and an expected target of 68000.
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(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)