Gold Price Forecast: Can Fed Chair Powell rescue XAU/USD buyers?
- Gold licks its wounds near monthly lows of $4,555 set Tuesday as Fed policy announcements loom.
- The US Dollar struggles following a profit-taking decline, despite the US-Iran stand-off.
- Gold defends $4,550 support amid bearish RSI, while strong resistance aligns near $4,700. A range breakout eyed?
Gold is consolidating the previous sell-off to monthly lows of $4,555 set on Tuesday, as traders turn to the sidelines and refrain from placing fresh bets ahead of the Federal Reserve (Fed) monetary policy decision due later on Wednesday.
Gold stalls decline ahead of Fed verdict
Gold came under intense selling pressure on Tuesday as the Oil price surge resumed on the back of the continued stand-off between the United States (US) and Iran, especially after US President Donald Trump expressed his displeasure with the new Iranian proposal toward ending the war.
Additionally, the United Arab Emirates’ (UAE) decision to leave OPEC and OPEC+ after nearly six decades also contributed to the renewed upside in the black gold.
The uptrend in Oil keeps expectations of rising inflation alive, bolstering hawkish bets surrounding the Fed, as the US central bank’s two-day monetary meeting concludes on Wednesday. Gold tends to thrive in a low-interest-rate environment.
Markets are widely expecting the Fed to hold rates steady in the range of 3.5% to 3.75% on Wednesday, but the message from outgoing Chairman Jerome Powell will be closely scrutinized for any hints on the possibility of a rate hike this year. Powell’s take on inflation amidst the Middle East conflict will also be dissected for future policy implications.
If Powell sticks to his patient and data-dependent rhetoric, prioritizing supporting the labor market, it would be perceived as dovish. In such a case, the US Dollar (USD) could come under intense selling pressure, fuelling a solid Gold price recovery.
Conversely, Gold could extend the recent decline if the Fed chair hints at a hawkish pivot, reviving bets for a rate hike by end-2026. Powell's comments will hold the key as its his last post-monetary policy meeting press conference. Kevin Warsh will lead the Fed as the new Chair from May 15.
In the lead-up to the Fed event risks, fresh developments around the US-Iran stalemate, and some profit-taking sprints could influence the Gold price action.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,596.48, keeping a bearish near-term bias as it holds below the short- and medium-term simple moving averages (SMAs). The 21-day SMA at roughly $4,726 and the 100-day SMA near $4,754 sit overhead as dynamic resistance, while the longer-term 200-day SMA around $4,270 remains a distant underlying support. A downward resistance trend line capped near $4,684 reinforces the topside constraint, and the Relative Strength Index (14) hovering around 40 hints at still-soft momentum, limiting recovery attempts for now.
On the topside, initial resistance is seen at the descending trend-line area around $4,685, followed by the 21-day SMA at $4,726 and the 100-day SMA near $4,754; a sustained break above these levels would be needed to ease the current bearish pressure and reopen the path toward the 50-day SMA around $4,850. On the downside, immediate focus stays on the recent pivot region around the current price, with the rising trend-line support near $4,381 next in line, ahead of the 200-day SMA clustered around $4,270, where stronger buyers could attempt to reassert the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
