Compared with his testimony in the Senate on Tuesday, Powell's speech in the House on Wednesday was milder, causing the US dollar to undergo a short-term correction and giving the gold price an opportunity to stabilize near 1800.
In his testimony on Tuesday, Powell's remark that "the Fed is prepared to accelerate the pace of interest rate hikes, and terminal rates may be higher than previously expected," stimulated expectations of rate hikes to reach new highs, with the expected terminal rate exceeding 5.7%. As a result, the US dollar index soared, and the gold price plummeted more than 30 dollars per ounce that day.
However, in last night's testimony in the House, Powell's speech was slightly milder. He emphasized that no decision has been made regarding the pace of rate hikes and reiterated that the Fed will be data-dependent. This cooled the prospect of rate hikes slightly, causing the US dollar index to pause its uptrend and gold prices to stop falling and rebound slightly, rising 0.35% intraday as of now.
However, it should be noted that although the market has cooled down on the prospect of Fed rate hikes in the past 24 hours, the cooling is not significant. According to the CME FedWatch tool, the market currently expects a 50 basis point rate hike at the March meeting with a probability of 76.4%, slightly lower than 78.6% one day ago. At the same time, the market's expectation for the Fed's terminal rate remains above 5.7%, with almost no signs of cooling compared to one day ago.
In the case of high expectations for rate hikes, the short-term decline in the US dollar index may not last long, which means that although the gold price may rebound and correct slightly, it is unlikely to evolve into an upward trend. Technically, attention should be paid to the support role of the 105-105.30 area for the US dollar index. If this area holds firm and resumes an uptrend, it will bring the risk of gold price breaking below 1800.
In the short term, gold remains in a volatile range, with a resistance level of 1825-1830. If the price reaches this level, consider entering a short position with a small position. The downside target is 1810-1800. If the price breaks below 1800, the downside will be further opened up. Pay attention to the non-farm data to be released on Friday, which will provide some guidance for the future market.
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