Gold Price Forecast: XAU/USD bounces but not out of the woods yet
- Gold’s recovery from six-week lows runs into fresh offers above $4,300 early Thursday.
- US Dollar consolidates hawkish Fed-inspired rally to seven-week highs amid US diplomatic efforts.
- Gold settled Wednesday below key 50-day SMA near $4,280, as the daily RSI remains bearish.
Gold is facing fresh sellers above $4,300 early Thursday, stalling its recovery from six-week lows of $4,235 reached soon after hawkish US Federal Reserve (Fed) monetary policy announcements.
Gold remains vulnerable post-Fed event
The Fed raised its benchmark interest rates by 25 basis points (bps) to 3.75%-4%, as widely expected, in a unanimous decision on Wednesday.
The Fed’s Summary of Economic Projections (SEP), the so-called Dot Plot, pencilled in another rate hike this year, while suggesting a muddy outlook for next year. For 2027, 10 to 14 officials expect rates to remain flat through 2027, while 4 participants still predict rate cuts.
Additionally, Fed Chair Kevin Warsh emphasized during his post-monetary policy meeting press conference that “the action will support a timelier return to its 2% inflation goal,” hinting subtly that the disinflation path remains intact.
This significantly affects the market’s view of the Fed’s path forward on rates, with traders digesting the overnight central bank event and stalling the US Dollar (USD) rally to seven-week highs across the board amid a pullback in US Treasury bond yields from multi-year peaks.
Gold also draws some support from the overnight retreat in Oil prices, which somewhat eases inflation fears. Oil fell sharply on Wednesday, following reports that Saudi Arabia is offering extra crude cargoes through Oman, reducing fears of supply disruptions.
Further, reports that US President Donald Trump is expected to meet Gulf leaders on the sidelines of the United Nations (UN) General Assembly in New York next Tuesday to discuss the next steps in the Iran war also spurred diplomatic optimism across markets, keeping Oil prices lower-bound.
However, the Gold price rebound appears to be a dead cat bounce as markets reprice a more hawkish Fed alongside other major central banks, acting as a headwind to the non-yielding bullion.
The focus now also shifts to the Bank of Japan’s (BoJ) monetary policy decision, due on Friday, which could significantly impact the USD/JPY pair, having a spillover effect on the Greenback and, in turn, on the USD-sensitive Gold.
Meanwhile, the US Jobless Claims and Pending Home Sales data will likely entertain traders amid a recovery in risk sentiment.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,285.21, retaining a mildly bearish bias as it slips below the 100-day simple moving average (SMA) at $4,322.66 while holding just above the 50-day SMA at $4,282.50. The 21-day SMA at $4,434.61 and the 200-day SMA at $4,540.22 sit overhead, suggesting that rallies remain capped by layered medium- and long-term resistance. The Relative Strength Index (14) at 44.07 hovers below the neutral 50 line, hinting at waning upside momentum rather than outright oversold conditions.
On the topside, initial resistance is seen at the 100-day SMA near $4,322.66, followed by the short-term barrier at the 21-day SMA around $4,434.61 and then the more substantial long-term cap provided by the 200-day SMA at $4,540.22. On the downside, immediate support is located at the 50-day SMA around $4,282.50; a sustained break beneath this floor would reinforce the bearish near-term tone and open the door to a deeper corrective phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
