After bouncing on top of support for a week, gold finally relented yesterday and fell. Our gold trading proxy, GLD, now sits almost mid-way between prior support at 120 and the next support level down, 118. The straw that broke the camel’s back came from the US this time; expectations of a June interest rate hike by the Fed drove up the US Dollar. So down went gold in US Dollar terms. Not unexpected, but a bit disappointing.
The Fed announced months ago that they were looking to make “at least” 2 rate hikes this year. With the earlier hike, now one expected in June, and another in the Oct-Dec timeframe, we may see no fewer than 3 rate hikes this year. Three rate hikes have to be the expectation now, so that becomes the basis, and changes from that will probably result in large market reactions. This should put a damper on trading gold in the US for a week or so. The Fed’s policy announcement is scheduled for 1800 GMT Wednesday, we’ll see what happens.