Gold Price Forecast: XAU/USD looks north but Fed’s forward guidance holds the key


  • Gold regains poise, finally finds acceptance above $1950
  • Dovish Fed expectations to keep the USD on the back foot.
  • Eyes on Fed’s economic projections and DOT plot for fresh direction.

Gold (XAU/USD) has regained the bids above $1950 on Wednesday, having settled Tuesday a tad lower at $1954. The bright metal witnessed good two-way price swings a day before, mainly driven by the US dollar dynamics and global market sentiment, in absence of any significant US macro news. Gold rose to two-week highs of $1972 in the first half of the day, helped by notable US dollar supply. Upbeat Chinese activity numbers lifted the market mood and downed the dollar. However, in the American trading, gold tumbled over $20 as the greenback staged a comeback amid resurgent haven demand on worries over the US fiscal deadlock and a ballooning deficit. Further, the tech rally-driven gains on Wall Street indices also dampened the sentiment around gold.  

In the lead up to the Federal Reserve (Fed) showdown due later on Wednesday at 1800 GMT, the dollar has given up the overnight gains amid dovish expectations. The Fed is unlikely to make any changes to its monetary policy settings but could formally announce the adoption of the average inflation targeting (AIT) framework. The key focus will be on the central bank’s long-term projections and dot plot chart which is expected to read dovish, as the economy continues to battle out the coronavirus blow. Dovish and uncertain Fed outcome could trigger a fresh sell-off in the US currency, benefitting gold.  

Gold: Short-tern technical outlook

Daily chart

fxsoriginal

Gold confirmed a symmetrical triangle breakout after closing Monday above the falling trendline (pattern) hurdle at $1955.18.

On Tuesday, the price closed in the red but finally found acceptance above the critical $1950 level for the second day in a row, having recaptured the 21-day Simple Moving Average (DMA), now at $1944.30.

With that, the price trades above all major DMAs alongside a bullish 14-day Relative Strength Index (RSI), currently inching slightly higher at 54.95.

Should the Fed turn out more dovish than expected, the metal has a room for a test of $2000. However, a closing above critical resistance around $1973 is needed for additional upside.

Alternatively, the price could drop back towards the upward-sloping 50-DMA at $1929, below which the September 8 low of $1906 could be put at risk. A daily closing below the latter would prompt the resumption of the corrective declines from record highs of $2075.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD: Upside stalls below 1.1700 as US dollar attempts a comeback

EUR/USD is consolidating the recent corrective advance towards 1.1700, as the US dollar attempts a comeback across the board, despite the risk-on market mood. Eurozone/ US Consumer Confidence data, Fedspeak in focus ahead of the first US Presidential election debate.

EUR/USD News

GBP/USD eyes 1.2900, Brexit brinkmanship, BOE’s Bailey in the spotlight

GBP/USD keeps buyers hopeful, despite the US dollar’s recent recoveries while holding gains above 1.2850. The cable extends gains, mainly driven by the Brexit-positive headlines but stays challenged ahead of the crucial departure talks in Brussels.

GBP/USD News

Gold looks north, two key levels to watch out

Gold started out the US NFP week on a solid footing, rallying nearly $20 on Monday. The metal bounced-off the SMA100 one-day support for the third straight day, courtesy of the broad retreat in the USD from two-month peaks.

Gold News

Forex Today: Dollar declines on hopes for a US fiscal deal, ahead of presidential debate

Stock markets remain cautiously optimistic and the dollar is on the back foot, extending the reversal from last week's moves. Investors are eyeing a slew of Federal Reserve speeches, fresh hopes related to Brexit, and the first presidential debate.

Read more

WTI slips below $40.50 amid US dollar recovery, API data eyed

WTI refreshed the intraday low after reversing from $40.79. US dollar regains upside momentum amid hopes of further stimulus. Challenges to the US-China trade deal add downside pressure on oil prices. API data, USD moves become the key amid a light calendar.

Oil News

Forex Majors

Cryptocurrencies

Signatures