As expected, XAU/USD (gold in terms of USD) posted sharp gains and reached fresh twelve–week highs at 1128.12 in a knee-jerk $ 13 rally following the FOMC statement release. The Fed made no changes to its monetary policy and held on to its gradual rate hike stance for this year. The US central bank did take notice of the recent global market turbulence and said it would assess the implications on the economic outlook. The prices quickly reversed the spike to multi-week highs and ended a tad lower near $ 1125 levels as markets digested the Fed decision. Prior to the Fed outcome, gold dipped as low as 1114.87 after the new home sales data from the US better expectations and lifted the US dollar across the board. The sales of the new homes jumped to 10-month high, rising 10.8% in Dec.
Currently, the yellow metal is correcting lower, after yesterday’s extensive rally, and languishes near session lows of 1117.19. With the Fed behind, gold bulls continue to assess the Fed’s language and turn cautious as the Fed remains very well on track to raise rates gradually this year. This has led to the ongoing weakness in the yellow metal, however, persisting risk-aversion seen across the financial markets keeps the downside restricted. Looking ahead, markets now await a fresh batch of macro releases from the US later today, which may provide fresh cues on further US dollar moves, eventually impacting the dollar-priced in gold. Among the first-tier data from the US, we have the durable goods orders, weekly jobless claims and pending home sales due for release in the NY session. The most crucial durable goods data is expected to show a drop in the orders last month.
Technicals –Looks to test key support near $ 1115
On the daily charts, the prices have retreated after forming three-white soldiers, mainly a reversal pattern, and hence, points to further downside towards the immediate support located near $ 1115, the confluence of 5-DMA and Fib 23.60% retracement of the latest rise. A break below the last, floors would open up for a test of 1105-1106 levels, where the horizontal 100-DMA and Fib 38.20% of the same rally intersect. While a failure to break 1115 levels, the prices will swing back higher towards daily highs at 1124.89, beyond which multi-week highs above 1128 would be tested. Overall, a mixed batch of US data will further add to the uncertainty surrounding Fed and therefore, boosts the demand for gold.
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