Gold Price Forecast: Nears key 61.8% Fib hurdle on dovish Fed, rate hike pause priced in?

Gold is currently trading at $1,318, the highest level since Feb. 28 and could soon probe the resistance at $1,321 (61.8% Fib R of $1,346.75/$1,281.01). 

The Fed kept rates unchanged as expected, but signaled no rate hike for 2019, as opposed to forecasts by major investment banks that the dot plot would show one rate hike each for 2019 and 2020. 

The dollar, therefore, was offered across the board post-Fed and remains on the defensive at press time with the 10-year treasury yield hovering at 12-month lows near 2.5 percent. 

Gold ended up creating a bullish outside-day yesterday and is currently trading just above yesterday's high of $1,317. On the daily chart, the metal has found acceptance above the 50-day moving average and the 5- and 10-day MAs are trending north, indicating a bullish setup. The 14-day relative strength index (RSI) is biased bullish with an above 50.00 print and is pointing north. 

On the 4-hour chart, the metal confirmed an ascending triangle breakout with a move above $1,310 earlier today. 

So, the path of least resistance appears to be on the higher side. That said, a convincing break above $1,321 (61.8% Fib R of $1,346.75/$1,281.01) may remain elusive as the rate hike pause signaled by the Fed may have been priced in by the markets over the last four months. 

It is worth noting that markets first began turning up the heat on the Fed to dial back rate hikes in November and by mid-to-end December, the rates markets had already priced in a pause for 2019.

This is evident from the fact that gold picked up a strong bid around $1,200 on Nov. 13 and was trading near $1,300 in the first week of December. 

Put simply, the Fed merely gave what markets wanted yesterday by signaling no rate hike in 2020. As a result, the greenback may recover lost ground, making it difficult for gold to cross $1,321. The outlook, however, would turn bearish only below $1,300. 

Also, a break above $1,321 would bolster the bullish setup on the daily chart and could yield a rally toward $1,340, although that looks unlikely, as discussed above. 

Daily chart