Gold to test $2000 on dovish Fed’s economic projections and dot plot

Gold (XAU/USD) has regained the bids above $1950 on Wednesday, having settled Tuesday a tad lower at $1954. XAU/USD looks north but Fed’s forward guidance, due later on Wednesday at 18:00 GMT, holds the key. Dovish expectations are set to keep the USD on the back foot, which benefits the yellow metal, FXStreet’s Dhwani Mehta reports.

Key quotes

“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.”  

“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.”