Gold down $25 to $1180, nears the lowest since March.
Over the past month, the stars aligned for gold. The ECB continued to print money, China cut rates and FX volatility remained sky high. Most of all, the US dollar sagged as weak economic data pointed to the Fed keeping rates lower for longer.
What happened to gold? Nothing.
With all the good news, gold couldn't break above the March highs of $1220. After weak GDP yesterday, even as the dollar was breaking down right across the market, gold still didn't touch above $1220.
If something can't rally on good news, it's bound to fall.
So when the Federal Reserve maintained an optimistic tone and kept a rate hike on the table, the gold bulls gave up. The initial wave of selling came after the decision in a $9 decline but bids ahead of $1200 held the line. The $1200 level finally broke today when good data on wages, jobless claims and the Chicago PMI suggested the Fed might be right.
From there it was a rush to the exits down to $1180. I like the downside but not until support at $1175 breaks.
Don't sell gold until $1175 breaks
I spoke with Kitco News after the FOMC decision yesterday:
Adam Button, currency analyst at Forexlive agreed that higher interest rates in June are unrealistic but the central bank is adding some uncertainty into the marketplace.
"If they wanted to signal that they weren't going to raise rates in June they could have. The deliberately left that out of the statement," he said.
Turning to the gold market, Button said that he would expect this statement to hurt prices in the near-term.
"Gold bulls would have loved to hear that the Fed was not raising rates in June but they didn't get that," he said. "I think this could cause the U.S. dollar to rebound and that will weigh on gold."
