Gold prices (XAU/USD) retreated from their all-time highs on Monday after comments from Federal Reserve Vice Chair Michael Barr. Barr’s remarks suggesting the need for sustained high interest rates to combat inflation dampened investor enthusiasm for the precious metal.
Reasons for the Pullback:
- Fed’s Hawkish Stance: Barr’s comments signaled a potentially longer period of high interest rates, making non-yielding gold less attractive.
- Stronger US Dollar: The US Dollar rose on the back of Barr’s comments, putting further pressure on gold prices.
Reasons for the Earlier Rise:
- Geopolitical Tensions: News of a helicopter crash in Iran, along with the ongoing Russia-Ukraine war and China-US tensions, fueled safe-haven demand for gold initially.
- Lowered Rate Cut Expectations: Cooler US inflation and retail sales data had led market participants to believe the Fed might cut rates sooner, which is generally positive for gold.
Technical Analysis:
- Parabolic Rise: Gold prices had climbed parabolically, reaching new highs above $2,440.
- Overbought RSI: The Relative Strength Index (RSI) reached overbought territory, suggesting a potential correction.
- Support Levels: A pullback might find support at the upper channel line and previous highs around $2,430.
- Resistance Levels: A break above the new all-time high of $2,450 could lead to a test of $2,500.
The recent pullback might be a temporary correction within an overall bullish trend for gold. The direction will likely depend on future economic data, geopolitical developments, and the Fed’s monetary policy decisions.