Gold may Struggle to Mount due to the Fed’s upward Revision of Economic Projections?

Gold fell as long as the Fed left interest rates unchanged.

On June 15, the FOMC is expected to maintain the federal funds rate in the 5.0% to 5.25% range and announced a continuation of its balance sheet runoff, among which, Fed will make effort to hit the 2% annual rate targets considering the risks of cumulative tightening, the impact of monetary policy on economic activity, and the lagged effects on inflation.

In addition, according to the rate projection "dot plot" released after the meeting, most Fed officials predict two more interest rate hikes this year, bringing to a range of 5.5% to 5.75%. Powell also made comments that a rate cut this year would not be appropriate. After the announcement, gold prices plunged again, dropping from $1953 to $1933, breaking through the support level of $1941 and returning to near its lows in March of this year.

So far, the Fed has raised interest rates for 10 consecutive times from zero to the current level. The decision to pause or "skip" a rate hike was already hinted at by Powell's dovish comments on May 19th, and the market had already priced in this expectation. Therefore, the reason why gold failed to rise is clear after the rate cut decision.

The further decline of gold in the near term was pressured by the Fed raising economic and interest rate projections for this year (raising the median projection for real GDP growth for 2023 from 0.4% to 1%, and the median projection interest rate for 2023 from 5.1% to 5.6%). This suggests that the US economy may not enter a recession as quickly as the market expected, and it may achieve a "soft landing." The rate cut expectation within this year has been largely eliminated, and a July rate hike expectation was increasing which may support a strong US dollar and continue to weaken gold, with little hope for a short-term rebound and continuing downward vol trend.

In terms of Tech bais, gold has broken through the support level of 1945 and reached around 1932, it is necessary to closely monitor the possibility of testing the next support level of 1913.

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