Gold Price Forecast: Fed’s decision could push XAU/USD back towards $2,000

XAU/USD Current price: $1,949.10

• The United State Federal Reserve is likely to hike its benchmark rate by 25 bps.
• Market participants await fresh clues on future monetary policy.
• XAU/USD managed to recover some ground ahead of Fed’s decision, maintaining a bullish stance.

Spot gold trades lifeless around $1,940 a troy ounce on Wednesday as investors await the United States Federal Reserve (Fed) monetary policy announcement. The US Dollar heads into the event with a weak tone amid a better market mood, as investors believe the worst of the banking crisis is over. Still, caution reigns amid uncertainty about what the central bank will do from now on.

Hopes for a 50 basis points (bps) rate hike following Chair Powell’s hawkish testimony before Congress diluted. Financial stability took center stage after an American bank, Silicon Valley Bank, collapsed a couple of weeks ago, the first of several troubled banks. Credit Suisse was the latest and the bigger to suffer a capital drawdown, finally rescued by UBS and the Swiss government. A 25 bps hike is already priced in, with the focus on fresh economic projections and hints about future monetary policy decisions.

XAU/USD price short-term technical outlook

The XAU/USD pair bottomed at $1,934.24 a troy ounce, a handful of cents above the 38.2% retracement of the latest daily advance measured between $1,809.38 and $2,009.77 at $1,932.65. It trades in positive territory ahead of the Fed announcement, and technical readings in the daily chart skew the risk to the upside. The bright metal develops above bullish moving averages, with the 20 Simple Moving Average (SMA) heading firmly north above the longer ones. Finally, technical indicators pared their declines well into positive territory after correcting extreme overbought readings.

The 4-hour chart, on the other hand, shows limited bullish potential. The pair keeps trading below its 20 SMA, which currently converges with the 23.6% retracement of the aforementioned advance at $1,962.30. The longer moving averages develop far below the current level, while technical indicators stand directionless within negative levels. A steeper recovery towards the $2,000 area seems likely if XAU/USD advances above the mentioned Fibonacci resistance, while bears will dominate the metal on a break below the daily low.

Support levels: 1,932.65 1,921.80 1,907.45

Resistance levels: 1,962.30 1,979.10 1,988.30  

View Live Chart for XAU/USD