Gold Price Forecast: XAU/USD buyers re-emerge ahead of the key Fed event risk
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CLAIM OFFER- Gold price bounces after the previous retreat from record highs, as Fed verdict looms.
- The US Dollar returns to the red amid pre-Fed caution and sluggish Treasury bond yields.
- Gold price could retest lifetime highs at $2,590 amid the bullish daily RSI and while above $2,560.
Gold price is finding some fresh demand near $2,570 early Wednesday, as buyers look to fight back control following the previous day’s correction from record highs of $2,590. Traders, however, could refrain from placing fresh directional bets on Gold price in the lead-up to all-important US Federal Reserve (Fed) monetary policy announcements.
Gold price eyes Fed interest rate decision and Powell speech
On the Fed day, markets continue to price in a 65% probability of 50 basis points (bps) interest rate cut, the CME Group’s FedWatch Tool showed, reviving the selling interest around the US Dollar (USD), as the US Treasury bond yields also turn defensive amidst the market caution.
Thus. Gold price attempts to retake the all-time-high just shy of the $2,600 mark, with eyes on the Fed verdict, Chairman Jerome Powell’s press conference and the Dot Plot chart, all of which will help gauge the US central bank’s future policy action.
If the Fed delivers a 25 bps rate cut later this Wednesday, it could fuel a knee-jerk US Dollar upswing. However, the immediate reaction to the Fed announcements could be overshadowed by the implications of the Fed’s projections and Powell’s words. Gold price, therefore, remains subject to intense volatility during the Fed event.
An outrightly dovish outcome and rate projections by the world’s most powerful central bank could prompt Gold price to refresh record highs at the expense of the US Dollar. "A dovish Fed on a substantial easing path should generally lead to a weaker dollar," said Nathan Swami, head of currency trading at Citi in Singapore.
In contrast, should the Fed acknowledge potential upside risks to inflation and maintain a cautious tone, it could bring the hawks back in the game, weighing negatively on the non-interest-bearing Gold price.
Gold price corrected briefly from record highs on Tuesday, courtesy of a profit-taking spree in the US Dollar ahead of the Fed event while strong US Retail Sales data also contributed to the resurgent USD demand. US Retail Sales rebounded by 0.1% MoM in August, data showed on Tuesday, against expectations for a 0.2% contraction. Data somewhat eased fears over a potential US ‘hard-landing’.
Gold price technical analysis: Daily chart
Gold buyers regain control, as the 14-day Relative Strength Index (RSI) remains comfortably above the 50 level, having eased off from near the overbought territory.
The optimism prevails so long as they defend the one-and-a-half-month-old symmetrical triangle target now support at $2,560.
That said, the immediate resistance is seen at the record high of $2,590, above which the $2,600 level will be tested.
Acceptance above that level will call for a test of the $2,650 psychological barrier.
If the Fed disappoints the doves, Gold price could witness a fresh sell-off, which could challenge the August 20 high of $2,532.
Additional declines will threaten the 21-day Simple Moving Average (SMA) at $2,522, below which the $2,500 mark will be on sellers’ radars.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Sep 18, 2024 18:00
Frequency: Irregular
Consensus: 5.25%
Previous: 5.5%
Source: Federal Reserve
- Gold price bounces after the previous retreat from record highs, as Fed verdict looms.
- The US Dollar returns to the red amid pre-Fed caution and sluggish Treasury bond yields.
- Gold price could retest lifetime highs at $2,590 amid the bullish daily RSI and while above $2,560.
Gold price is finding some fresh demand near $2,570 early Wednesday, as buyers look to fight back control following the previous day’s correction from record highs of $2,590. Traders, however, could refrain from placing fresh directional bets on Gold price in the lead-up to all-important US Federal Reserve (Fed) monetary policy announcements.
Gold price eyes Fed interest rate decision and Powell speech
On the Fed day, markets continue to price in a 65% probability of 50 basis points (bps) interest rate cut, the CME Group’s FedWatch Tool showed, reviving the selling interest around the US Dollar (USD), as the US Treasury bond yields also turn defensive amidst the market caution.
Thus. Gold price attempts to retake the all-time-high just shy of the $2,600 mark, with eyes on the Fed verdict, Chairman Jerome Powell’s press conference and the Dot Plot chart, all of which will help gauge the US central bank’s future policy action.
If the Fed delivers a 25 bps rate cut later this Wednesday, it could fuel a knee-jerk US Dollar upswing. However, the immediate reaction to the Fed announcements could be overshadowed by the implications of the Fed’s projections and Powell’s words. Gold price, therefore, remains subject to intense volatility during the Fed event.
An outrightly dovish outcome and rate projections by the world’s most powerful central bank could prompt Gold price to refresh record highs at the expense of the US Dollar. "A dovish Fed on a substantial easing path should generally lead to a weaker dollar," said Nathan Swami, head of currency trading at Citi in Singapore.
In contrast, should the Fed acknowledge potential upside risks to inflation and maintain a cautious tone, it could bring the hawks back in the game, weighing negatively on the non-interest-bearing Gold price.
Gold price corrected briefly from record highs on Tuesday, courtesy of a profit-taking spree in the US Dollar ahead of the Fed event while strong US Retail Sales data also contributed to the resurgent USD demand. US Retail Sales rebounded by 0.1% MoM in August, data showed on Tuesday, against expectations for a 0.2% contraction. Data somewhat eased fears over a potential US ‘hard-landing’.
Gold price technical analysis: Daily chart
Gold buyers regain control, as the 14-day Relative Strength Index (RSI) remains comfortably above the 50 level, having eased off from near the overbought territory.
The optimism prevails so long as they defend the one-and-a-half-month-old symmetrical triangle target now support at $2,560.
That said, the immediate resistance is seen at the record high of $2,590, above which the $2,600 level will be tested.
Acceptance above that level will call for a test of the $2,650 psychological barrier.
If the Fed disappoints the doves, Gold price could witness a fresh sell-off, which could challenge the August 20 high of $2,532.
Additional declines will threaten the 21-day Simple Moving Average (SMA) at $2,522, below which the $2,500 mark will be on sellers’ radars.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Sep 18, 2024 18:00
Frequency: Irregular
Consensus: 5.25%
Previous: 5.5%
Source: Federal Reserve
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