XAU/USD outlook: Bulls accelerate on expectations for more dovish Fed

XAU/USD

Gold extends rally in the fourth straight day and hit the highest since mid-June.

The yellow metal accelerated on Wednesday (up 1.25% until the start of American session), driven by weaker dollar and growing expectations that the Fed would further soften its tone on the monetary policy.

Traders focus on the release of minutes of central bank’s December’s meeting, due later today, expecting more dovish stance, with speculations that the Fed would go for 25 basis points hike in December, after four straight 0.75% hikes and 0.5% increase in December that signaled a slowdown in policy tightening pace.

Wide expectations point to Fed’s potential decision to slow tightening, to see the impact of its recent action, rather than worries about slowdown in economic growth.

If Fed’s rhetoric today comes in line with expectations, gold would advance further, while fresh bulls are expected to face strong headwinds if policymakers remain in hawkish mode.

Fresh acceleration on Wednesday surged through Fibo barrier at $1842 (50% retracement of $2070/$1614 descend) and pressuring June 12 lower high ($1879), which guards next significant barriers at $1896/$1900 (Fibo 61.8%/psychological).

Daily studies are firmly bullish, though overbought conditions warn that bulls may pause for consolidation.

Broken Fibo resistance at $1842 reverted to support which should ideally contain and keep bulls intact, with deeper dips to find ground above rising 10DMA ($1818) and maintain bullish bias.

Res: 1865; 1875; 1879; 1900.
Sup: 1850; 1842; 1818; 1803.

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