Powell lives up to expectations and calms investors down

March 18, 2021 14:30

As we mentioned yesterday, investors' expectations focused on the Fed meeting and the words of Jerome Powell, and he did not disappoint the markets. 

The chairman of the Federal Reserve made it very clear during his post-meeting press conference that the central bank's monetary policy would remain unchanged for a while to encourage economic recovery. Despite this, the Fed expects the US economy to grow this year by 6.5%, an increase over its previous expectations which predicted growth of 4.2% for 2021.

On the other hand, he said that inflation could rise somewhat more than expected but that it could remain around the 2% level for the next 2 years, being an acceptable level. This caused an increase in bond yields supporting the dollar index.

This rebound in bonds and in the dollar during the day today is translating into declines in gold, higher than 0.70% at the moment. During the last few months, we have been able to observe how this precious metal has been gradually losing value after marking all-time highs last August 2020 following a bearish channel.

In recent weeks, we have been able to observe how after breaking its first support level (in red) the price continued its declines until the coincident zone of the lower band of the channel, the 61.8% Fibonacci retracement level and the red band, where the price finally made an upward rebound in search of an average of 18 black sessions that acts as the main resistance level.

It is important that we observe the evolution of prices since if the current trend in North American bonds continues, gold could again gain downward momentum that takes it back to its important support level, and truncate this latest upward rebound. As long as gold is unable to break above the upper trend band of the downtrend channel, sentiment will remain negative.

Source: Admiral Markets MetaTrader 5. GOLD daily chart. Data range: from November 21, 2019 to March 18, 2021. Prepared March 18, 2021 at 1:00 p.m. CET. Keep in mind that past returns do not guarantee future returns.

Price evolution in the last 5 years:

  • 2020: 21.86%
  • 2019: 15.45%
  • 2018: -3.22%
  • 2017: 12.75%
  • 2016: 10.12%

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