Technically, the price of gold has been trading in a strong sideways drift since May 18, with a support price of $1,930 per ounce and a resistance of $1,983.
PP Link Securities (PPLS) business manager Long Samnang said the market’s sideways movement was largely due to the wait on the US Federal Funds Rate announcement, which was set for release at 1am on Thursday, June 15, Cambodian time.
Following the release of the statement by the Federal Open Market Committee, the sideways drift was likely to come to an end, he said, with either a bullish or bearish trend emerging depending on the interest rate decision.
“With the US rate of inflation at 4.05 per cent – which is double the two per cent target – it would be a possible scenario for the Fed to hike the rate by 0.25 per cent, bringing it to 5.5 per cent.
“If the Fed were to raised interest, the value of the haven asset gold would be affected by a stronger US dollar as investors sell the greenback for profit.
“But if a rate hike wasn’t to be implemented this time round, the price of gold could be set for a significant rise,” said Samnang.
However, future trends for gold and the US dollar will not solely depend on the Fed’s decision.
“Monetary policy meetings at the Fed, the European Central Bank [on June 15] and the Bank of Japan [June 15-16] will set the tone for the week as markets seek clues from policymakers on the future path of interest rates,” Reuters reported.
Samnang said that regardless of the two possible trends following the Fed’s move, the price of gold would likely rise either way, with any bearish trend temporary.
If the Fed was to increase the US interest rate, the price of gold would drop briefly before recovering, while if there were to be a rate hike pause, the yellow metal could rise strongly to around $2,000 per ounce.
So for this week’s trading recommendation, investors could wait a while to let the fluctuations in the market settle.