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Market Focus: Powell Speech to Drive Gold and S&P 500

Powell gold S&P 500

Fed Preview: Powell may adopt a hawkish stance. Gold faces downward pressure. S&P 500 struggles to breach resistance. Volatility ahead.

As the Federal Reserve gears up to announce its monetary policy decision following the April 30-May one gathering, market observers are bracing for potential signals of a more hawkish stance from Fed Chair Jerome Powell. While expectations suggest the Federal Open Market Committee (FOMC) will maintain borrowing costs and leave forward guidance unchanged, Powell’s remarks during the subsequent press conference could be pivotal.

Amid recent economic indicators hinting at stubborn inflationary pressures and tightening labor markets, Powell might adopt a more assertive tone. Analysts anticipate he could caution against premature policy adjustments, emphasizing the need for patience. Inflation has notably exceeded expectations, with core PCE (Personal Consumption Expenditures) registering a robust 4.4% annualized rate over the past three months.

A shift towards hawkish rhetoric may challenge the previously projected 75 basis points of easing for 2024, suggesting a delay in rate cuts until late 2024 or even 2025 to curb inflationary risks. Such indications could buoy U.S. Treasury yields and strengthen the dollar while potentially dampening gold prices.

Although rate hikes are not the baseline scenario post the 525 basis points tightening between 2022 and 2023, attention will gravitate towards Powell’s stance on potential future hikes. Any suggestion of resuming tightening measures could trigger heightened market volatility and a sell-off in risk assets.

Market Focus: Powell Speech to Drive Gold and S&P 500

Gold Price Technical Analysis

Gold (XAU/USD) experienced a sharp decline, breaching key support levels and hitting its lowest point since early April. Should the downtrend persist, Fibonacci support at $2,260 could come into play, with a potential bottoming-out process or a further decline towards the 50-day simple moving average at $2,225.

Conversely, if a bullish reversal occurs, resistance levels are identified at $2,295, $2,320, and $2,355, with attention drawn to a short-term descending trendline near $2,390. Breaking above this barrier might set the stage for a rally towards $2,320.

S&P 500 Technical Analysis

The S&P 500 faced significant downside pressure, dropping over 1.5% after failing to breach confluence resistance in the 5,165/5,185 range. Further bearish momentum could lead to a retest of April lows of 4,690, with support at risk at the 4,855 level.

Traders are advised to exercise caution in the face of prevailing bearish sentiment. A decisive break above the resistance zone at 5,165/5,185 could signal a positive shift, potentially driving prices towards 5,260 and beyond and redirecting focus toward record highs.

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