Gold faced significant pressure following hawkish statements from the Federal Reserve, leading to a substantial decline in price from 2450 to 2370, signaling a notable momentum shift. Traders should watch for consolidation or a bullish correction, which could provide further signals for selling when a clear structure forms.
Early in the session, the market was already feeling the impact of poor home sales data, despite record-high April home prices. Additional pressure came from Target's report of declining traffic and smaller spend data. However, it was the release of the FOMC Minutes that triggered a sharp downturn, with the Fed's more hawkish comments adding to the market's bearish sentiment.
For those who argue that recent CPI and Retail Sales data might render the FOMC's statements outdated, the chart below illustrates ongoing concerns: growth macro data has been disappointing since the last FOMC meeting, while inflation data continues to rise, perpetuating the stagflation scenario.
The market saw plenty of Fed Speak throughout the day, leaving stocks in the red by the close despite a late-day rebound attempt. Small Caps were the worst performers, while the Nasdaq managed to recover and close unchanged, making it the "prettiest horse in today's glue factory."
Key takeaways from the FOMC Minutes include:
- Fed officials noted "disappointing" inflation readings in the first quarter.
- There was a discussion on the possibility of holding rates steady for longer if inflation does not fall.
- Officials still view monetary policy as restrictive but are uncertain about the degree of its restrictiveness.
This analysis suggests a cautious outlook for gold, with traders advised to stay alert for market signals that could guide future trading strategies.