Gold sell-off stalls near 50-DMA, June Fed rate hike is 100% certain

The sell-off in gold appears to have run out of steam near 50-DMA support of $1261 even though the probability of a rate hike at the conclusion of the Federal Open Market Committee meeting on Wednesday is 100%.

Is $1300 a distant dream?

Prices topped out at $1296 (June 6 high) as the 10-year treasury yield recovered from the low of 2.13% to 2.22%. The recovery in the treasury yield and the resulting drop in gold ahead of the Fed decision suggests the markets may have price-in a 25 basis point rate hike.

The metal may regain the bid tone and move towards the key psychological figure of $1300 if the Fed delivers a dovish hike - 25 bps hike and a dovish forward guidance on inflation and interest rates. As for today, the focus is on the US PPI release and NFIB Business Optimism Index.

Gold Technical Levels

The metal was last seen trading around $1266/Oz. A break above $1273 (5-DMA) would open up upside towards to $1277.91 (Apr 25 high) and $1296 (June 6 high). On the other hand, a breakdown of support at $1261 (50-DMA) could yield a pullback to $1245 (100-DMA) and $1238 (200-DMA).