The price of gold is declining from a new record high of $2,223 that it hit in early Asian trading on Thursday, but it continues to hold above the $2,200 mark due to persistent losses in the US dollar and US Treasury bond rates. The market assesses the US Federal Reserve’s dovish decision to hold off on raising interest rates on Wednesday.

Technical Overview

Gold price verified a Bull Flag, as depicted on the daily sticks, closing above the $2,161 falling trendline resistance on Wednesday.

The following significant bullish goals are the psychological level of $2,250 and the record high of $2,223 if gold purchasers can regain composure.

On the other hand, the 14-day Relative Strength Index (RSI) is in highly overbought territory, indicating that the recent decline may continue before the upside picks up speed.

The high point of $2,189 on Wednesday will be tested on a daily closing below $2,200.

If the latter is accepted, there would be more downside pressure towards Monday’s low of $2,146. If this is accepted, buyers will be protected by the declining trendline support of around $2,138.

Fundamental Overview

The Fed’s dovish perspective on interest rates on Thursday led to the gold price outperforming for the second day in a row and restarting its record-breaking run.

The US Dollar declined in tandem with the yields on US Treasury bonds, as the Fed’s December economic projections—known as the “Dot Plot chart”—remain unchanged at three rate cuts this year. Following two straight months of higher inflation readings, markets have started pricing in two rate cuts from the Fed this year.

The median Core PCE inflation for 2024 increased by 0.2%, but the median Fed dot plot remained constant. Markets interpreted this as dovish, putting the US dollar under the bus and pushing the price of gold to a new all-time high that broke through the $2,200 barrier.

Chair Jerome Powell emphasized that recent high inflation readings had not altered the underlying “story” of gradually lowering pricing pressures in the United States (US). Thus, the Fed maintained the key rates in the 5.25% to 5.50% target range on Wednesday.

According to the CME Group’s FedWatch Tool, markets are now betting a 75% probability that the Fed will start easing in June, up from 59% on Tuesday.

Soon, the S&P Global US preliminary PMIs and Fedspeak will continue to be closely watched for a further spike in the price of gold.