Gold Price Forecast: XAU/USD reclaims 100 DMA, further upside hinges on Fed Chair Powell


  • Gold price is defending $1,960, with the upside capped by renewed US Dollar demand.
  • US Treasury bond yields hold gains, awaiting Federal Reserve policy announcements.
  • Gold price closed Tuesday above 100 DMA at $1,964, Fed Chair Powell holds the key. 

Gold price is clinging to critical 100-Daily Moving Average (DMA) at $1,964, consolidating the previous rebound from six-day lows, as investors gear up for the all-important US Federal Reserve (Fed) interest rate decision, followed by Chair Jerome Powell’s press conference. 

All eyes on Federal Reserve Chair Jerome Powell’s presser

The United States Dollar (USD) is finding fresh demand in Asia this Wednesday, capping the recovery in the Gold price while the US Treasury bond yields enter a phase of upside consolidation ahead of the key Fed event. Markets stay cautious and refrain from placing any fresh bets on the Greenback as well as Gold price, as Fed Chair Jerome Powell’s words and the probable language in the policy statement could ramp up volatility across the financial markets.

The Fed is widely expected to raise rates by 25 basis points (bps) at its July meeting and, therefore, the Bank’s view on the interest rates path and the economy is likely to be closely scrutinized, shaping up Gold price direction in the coming weeks.

Recent signs of resilience in the United States economy keep hopes alive for another rate hike by the Fed beyond July, especially after the US Conference Board Consumer Confidence increased to a two-year high of 117.0 in July, in the wake of a persistently tight labor market and receding inflation. The probability of a Fed rate hike pause in September has dropped to 79% from about 85% seen last week.

If Fed Chair Jerome Powell signals a pause at the September meeting but leaves doors open for a rate hike later this year, his words will renew hawkish expectations and send the US Dollar higher at the expense of Gold price. However, the US Dollar could drop alongside the US Treasury bond yields should Powell hints at the end of the Fed’s tightening cycle, expressing economic growth worries.

Citing a third scenario, FXStreet’s Senior Analyst, Yohay Elam, notes: “If Powell says the Fed is open to raising rates as soon as September, it would serve as a bigger scare for investors, sinking stocks, melting Gold, and supercharging the US Dollar.“

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price turnaround found acceptance above the 100-Daily Moving Average (DMA) support-turned-resistance at $1,964 after settling Tuesday above the latter.

However, Gold buyers have turned cautious in the lead-up to the Fed policy announcements. Dovish Fed outlook could see Gold price catching a fresh bid wave toward the two-month highs of $1,988 above which the $2,000 threshold will be challenged again.

The 14-day Relative Strength Index (RSI) stays firmer above the midline, suggesting that the upside appears more compelling for Gold price.  

In case Powell sticks with his hawkish rhetoric, signaling another rate hike this year, Gold price is set to test the flattish 50 DMA of $1,947. Selling pressure is likely to intensify below the latter, opening flloors for a test of the upward-sloping 21 DMA of $1,942.

Further south, the $1,930 round figure will be the line in the sand for Gold buyers.

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays below 1.0700 after upbeat US PMI data

EUR/USD stays below 1.0700 after upbeat US PMI data

EUR/USD stays on the back foot and trades in negative territory below 1.0700 as the US Dollar benefits from upbeat data in the American session. S&P Global reported that the economic activity in the US private sector continued to expand at a robust pace in June.

EUR/USD News

GBP/USD drops to fresh multi-week low below 1.2650

GBP/USD drops to fresh multi-week low below 1.2650

GBP/USD remains under bearish pressure and trades at its lowest level since mid-May below 1.2650. The stronger-than-forecast Manufacturing and Services PMI data from the US helps the USD hold its ground and causes the pair to stretch lower.

GBP/USD News

Gold drops below $2,340 as US yields rebound

Gold drops below $2,340 as US yields rebound

Gold loses its traction and trades deep in the red below $2,340 in the second half of the day on Friday. The benchmark 10-year US Treasury bond yield pushes higher following the upbeat PMI data from the US, weighing on XAU/USD.

Gold News

Bitcoin retraces to crucial support

Bitcoin retraces to crucial support

Bitcoin price encounters resistance at weekly highs before retracing to seek support at a crucial level, while Ethereum and Ripple align closely with Bitcoin's movements, gearing up to surpass resistance barriers and embark on upward rallies.

Read more

Week ahead – US PCE inflation the highlight of a relatively light agenda

Week ahead – US PCE inflation the highlight of a relatively light agenda

Core PCE inflation to test bets of two Fed rate cuts in 2024. Yen awaits BoJ Summary of Opinions, Tokyo CPI. Canadian CPI data also enters the spotlight.

Read more

Majors

Cryptocurrencies

Signatures