GOLD Fed in spotlight – Bullish explosion or crash ahead?

Updated

XAUUSD OUTLOOK
- Gold prices retreated this week but are still up more than 5% in March
- The Fed’s monetary policy announcement will take center stage in the coming week

Gold prices (XAU/USD) fell 1.05% this week to $2,155 due to higher U.S. Treasury yields and the U.S. dollar. However, gold has maintained strong bullish momentum in March, with a gain of around 5.5% and recent all-time highs.

Earlier this month, gold prices surged as investors anticipated interest rate cuts by the Federal Reserve. The rally further intensified after Fed Chair Jerome Powell indicated that policymakers were close to gaining confidence in the inflation outlook. However, recent consumer price data suggests that progress on disinflation may be stalling or reversing, causing a shift in the market sentiment for gold.

With inflation risks emerging and reflected in recent CPI and PPI reports, the central bank may adopt a more cautious stance, indicating the need for patience in removing policy measures. This could result in fewer rate cuts than initially expected. The Federal Reserve's plans will be clarified next week when they announce their March decision. While policy settings are anticipated to remain unchanged, there could be revised guidance and forecasts based on new macroeconomic information, as data-dependency is a key principle.

In the latest Summary of Economic Projections, the Fed hinted that it would deliver 75 basis points of easing this year and market pricing has converged to this estimate of late. If policymakers were to indicate an intention to deliver fewer cuts than what’s currently discounted, we could see bond yields and the U.S. dollar push higher. This should be bearish for gold prices.

XAUUSD FORECAST - TECHNICAL ANALYSIS
Gold prices fell this week, but managed to hold above support at $2,150. Bulls must actively protect this technical zone to prevent an escalation of selling pressure; failure to do so may trigger a pullback towards $2,085. In case of further weakness, the spotlight will be on $2,065.

On the flip side, if buyers regain decisive control of the market and spark a bullish reversal from the metal’s current position, the first obstacle lies at the record peak established earlier this month at $2,195. Further upward movement will draw attention to trendline resistance near $2,205.

🖥 GOLD MARKET ANALYSIS AND COMMENTARY - [March 18 - March 22]

Resistance: 2160 - 2165 - 2173
Support: 2146 - 2135 - 2125 - 2100

Note

SELL XAUUSD PRICE 2166 - 2164⚡️
↠↠ Stoploss 2170

→Take Profit 1 2159
↨
→Take Profit 2 2154

BUY XAUUSD PRICE 2134 - 2136⚡️
↠↠ Stoploss 2130

→Take Profit 1 2141
↨
→Take Profit 2 2146

Note

Gold has been under pressure this week due to the US dollars rebound, although the precious metal remains near a multi-decade high. Technical analysts will be closely watching a Bullish Pennant formation that is nearly complete. The next few days will see if this pattern plays out.

Note

GOLD gains are limited amid a cautious market

Note

SELL XAUUSD PRICE 2178 - 2176⚡️
↠↠ Stoploss 2182

→Take Profit 1 2171
↨
→Take Profit 2 2166

BUY XAUUSD PRICE 2134 - 2136⚡️
↠↠ Stoploss 2130

→Take Profit 1 2141
↨
→Take Profit 2 2146

Note

As a result of this decision, the value of the dollar compared to the yen has increased and is approaching a previous high. This has also put pressure on the euro, making it less valuable compared to the dollar. So, in essence, the dollar has become stronger against these currencies.

Interestingly, the value of gold has not been affected by the stronger dollar and is still trading at a key level. As long as gold remains above this key level, it is expected to continue its positive trend.

Note

If the Federal Reserve signals a greater inclination to exercise patience before removing policy restraint and shows less willingness to deliver multiple rate cuts, we could see U.S. Treasury yields and the U.S. dollar charge upwards in the near term, extending their recent rebound. Meanwhile, stocks and gold, which have rallied strongly recently on the assumption that the central bank was on the cusp of pivoting to a looser stance, could be in for a rude awakening (bearish correction).

Note

Gold turned down to $2,157

After rising more than $10 to above $2,164, gold is now back down to $2,157.

Today's focus is on the Fed's monetary policy decision and Fed Chairman Powell's speech.

Trade active

Plan SELL + 50pips, close a part move SL to entry.🔥

Note

Gold prices rose after the Fed's decision and the decline in the US dollar and yields. The indication of three rate cuts this year is negatively affecting the dollar. To understand the Fed's monetary policy outlook, traders should closely follow Chairman Powell's press conference. However, today's reaction may change due to the upward revision of the long-term equilibrium rate.

Note

Gold continued its bullish run after Wednesday’s FOMC meeting provided the catalyst. Bullish continuation was something highlighted in the previous gold update, as long as prices consolidated above the prior all-time high of 2146.80 – which they had.

Note

After the Fed meeting, gold prices are expected to reach the resistance level at $2,222/ounce. If this level is surpassed, it is likely that prices will reach between $2,228 - $2,234/ounce. In the long term, the Fed plans to cut interest rates three times this year starting in June, which will lead to a decline in USD compared to other currencies.

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