Gold Price Forecast: Fed Decision to Guide Trend, Critical Levels For XAU/USD

GOLD PRICE FORECAST

• Gold prices (XAU/USD) have managed to rebound modestly in recent days, but it continues to exhibit a consolidation-oriented bias
• Volatility could pick up next week, with the Fed decision on the economic calendar
• This article focuses on gold’s technical outlook, examining important price thresholds that could be relevant in the upcoming days

Most Read: USD/JPY in Consolidation Stage but Fed Decision May Spark Big Directional Move

Gold has displayed limited volatility in recent trading sessions and hasn’t really gone anywhere for the past two weeks or so, with prices moving up and down with no discernable trend. Things, however, could change in the coming days, courtesy of a high-impact event on the U.S. economic calendar: the Federal Reserve decision on Wednesday.

In terms of expectations, the U.S. central bank is seen holding borrowing costs unchanged but could drop its tightening bias from the post-meeting policy statement.

While strong economic growth, as reflected in the latest GDP report, argues in favor of policymakers retaining a hawkish tilt, progress on disinflation makes the case to start laying the groundwork for a shift toward an easing stance. It is for this reason that a dovish outcome should not be entirely ruled out.

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In the event of Chair Powell embracing a softer position and signaling that deliberations on the broad parameters for rate cuts are well-advanced and have progressed further compared to the previous meeting, traders should prepare for the possibility of a sharp pullback in bond yields. This should support gold prices.

The opposite is also true. If the FOMC chair chooses to push back against market pricing for deep rate reductions and the timing of the first cut, yields should continue to recover, boosting the U.S. dollar and weighing on precious metals. However, given Powell's pivot last month, this scenario is less likely to materialize.

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GOLD PRICE OUTLOOK - TECHNICAL ANALYSIS

After dipping to multi-week lows last week, gold has rebounded modestly, but it continues to exhibit a consolidation-oriented bias, with prices trapped between trendline resistance at $2,030 and horizontal support at $2,005. For significant directional moves to occur in the coming days, either of these two thresholds will need to be taken out.

Assessing possible outcomes, a resistance breakout could propel XAU/USD towards $2,065. On further strength, the bulls may initiate an assault on $2,080. Conversely, in the event of a support breach, we could see a retracement toward $1,990, followed by $1,975. Continued weakness from this point onward may bring the 200-day moving average into play.

GOLD PRICE TECHNICAL CHART

Gold Price Chart Created Using TradingView