With Oil Collapse causing market turmoil, gold soars to new peaks and sparks speculation of increased XAU/USD

Gold Prices Rise After Fed Raises Interest Rates

 

What Happened?

 

Gold prices rose while crude oil prices fell after the Federal Open Market Committee (FOMC) raised its target interest rate by 25 basis points to 5-5.25%. The US dollar also weakened against all G-10 currencies, potentially contributing to the rise in gold prices.

 

Gold Prices Reach New Highs

 

The front futures contract for gold on COMEX reached $2,085.4 an ounce, the highest level since August 2020. However, a Triple Top is now in play unless a new high is made. A Triple Top is an extension of a Double Top.

 

Interest Rate Markets

 

Interest rate markets appear to be calling the Fed’s bluff with cuts being priced in as early as the third quarter. The market appears to have placed a significant emphasis on the pivot in some of the language.

 

What Does This Mean?

 

Although the Fed has raised interest rates, the market is anticipating cuts ahead. Fed Chair Jerome Powell emphasized that each decision going forward will be data-dependent on a meeting-by-meeting basis requiring ongoing assessment. Nonetheless, Treasury yields went lower again with the 2-year bond touching 3.81%, notably below last month’s peak of 4.29%.

 

Gold Volatility

 

Gold volatility ticked higher in the hectic price action. The GVZ index measures gold volatility in a similar way that the VIX index measure volatility on the S&P 500.