Gold Price Talking Points
The price of gold[1] attempts to retrace the decline following the Federal Open Market Committee (FOMC) Minutes[2] as the 10-Year US Treasury yield falls back towards the 50-Day SMA (1.63%), and recent developments in the Relative Strength Index (RSI) indicates higher gold prices as the oscillator flirts with overbought territory.
Gold Price Rally Pushes RSI Into Overbought Territory
The price of gold has cleared the February high ($1872) after pushing back above the 200-Day SMA ($1844), and precious metal may approach the yearly high ($1959) as a growing number of Federal Reserve officials[3] warn of a transitory rise in inflation.
However, the minutes from the April meeting revealed a growing discussion within the FOMC[4] to scale back the emergency measures as “a number of participants suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”
In turn, the FOMC may gradually change its tone over the coming as “continued progress on vaccinations and accommodative monetary and fiscal policies most likely would underpin further gains in economic activity,” and it remains to be seen if the central bank will adjust the forward guidance at its next interest rate decision on June 16 as Fed officials are slated to update the Summary of Economic Projections (SEP).
Until then, the dovish forward guidance may keep the price of gold afloat as “participants agreed that the economy was still far from the Committee's longer-run goals,” but speculation for a looming change in Fed policy may underpin the rise in longer-dated US Treasury yields as “participants assessed that risks to the outlook
