While Gold Crumbles, The Hedging and Forecasting Myth Speaks to Markets By Investing.com

© Reuters.

Investing.com – The day is down sharply on the Fed’s announcement last night, which saw the market as more inclined to tighten monetary policy. Fed officials believe that by 2023, the interest rate will rise twice. Although these expectations are positive for the markets, the risk appetite declined strongly in the markets.

This was supposed to work in favor of gold, but gold is also retreating for fear of tightening monetary policy, and a strong economic recovery.

It recorded a decline of more than 4%, even after the disappointment that hit the market from the labor market data. While the daily technical analysis from Investing.com indicates that the signals are very negative for the price of gold. The support and resistance levels are as follows:

Support: 1767.96, 1790.20, 1803.95

Resistance: 1848.43, 1862.18, 1884.42

Expectations boast

Wall Street named this guy for the sincerity of (SE:) and his predictions about stocks following the Fed-driven stock market rally “The Great Tipper”.

Tepper’s outsized prediction about the stock market in 2010 has worked for investors for more than 10 years, according to CNBC. “Don’t fight the Fed” to the next level, hedge fund legend David Tepper said on September 24, 2010, two years after Lehman Brothers collapsed in the 2008 financial crisis.

He said that the efforts of the US central bank to support the economy at rates close to zero and the massive purchases of bonds, will make most investment options rise.

What now?

David Tepper believes the Federal Reserve has done a good job, showing that policymakers are not asleep while driving monetary policy for the world’s largest economy. The president of Appaloosa said that despite the Fed’s plan to raise the schedule for increasing interest rates, the stock market is still doing well.

“I think the stock market is still doing just fine at the moment,” Tepper told Wapner in an interview on CNBC.

Tepper predicts that the Fed likely won’t start to scale back its quantitative easing bond-buying program until later this year, adding that when the Fed starts to scale back its purchases it will be a good sign that the economy is in really good shape.

Fears

Many investors and traders fear that when the Fed cuts quantitative easing, the stock market will go down. Many investors believe such a move would be the start of a central bank tightening, with interest rates increasing not far away.

The Fed’s critics say monetary policy makers are not acting fast enough to stem rising inflation in an economy that is recovering strongly from the coronavirus pandemic. Tepper said in February 2020, before stocks actually started to crash due to the pandemic, that the virus could be a game changer in the markets, according to CNBC.

Wall Street

It now fell by about 0.7% at levels of 33.7 thousand points, losing about 250 points. While the broader Standard & Poor’s index fell by 0.2%, down to 4217 points. On the other hand, the Nasdaq technology stock index rose by more than 0.71% at 14,141 points.

Gold losses jumped to more than $80 and the spot price for an ounce of gold fell by about 4.5% at levels of $1777.7. While it rose strongly at levels of 91.76, the dollar is rising against 0.62%, the yen 0.35%, and the pound by about 0.4%.

The 10-year yield is still down by 0.055 or 1.524%.

fed

The Federal Reserve kept the US interest rate stable near zero, in the range of 0.00% – 0.25%. The Fed expects to raise interest rates in 2023 instead of 2024. The Fed raised core inflation expectations by 1%, to 3.4%, compared to its March forecast. The Fed insisted that inflation was “phased”. Jeffrey Haley, chief market analyst at OANDA, said gold was crushed overnight by the Federal Reserve’s increased bias towards monetary tightening. Halley added that the recovery in gold should be approached with caution as we have yet to see how the change in tone for the entire Fed will develop in the markets. Chief Market Analyst at Oanda concluded that gold’s daily close below $1,797.50 points to a possible deeper correction.

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