Gold Price Forecast: Investors Await Fed Decision Amid Banking Crisis Fears

Gold Highlights

• Gold maintains position near $2,000 threshold
• Fed’s rate decision announcement at 18:00 GMT
• U.S. debt default fears drive attention to gold

Gold Overview

On Wednesday, the price of gold (XAU) is edging higher, while remaining on the strong side of the important threshold of $2,000. Gold traders are focusing on the upcoming decision by the U.S. Federal Reserve about interest rates, which was scheduled for later today at 18:00 GMT.

At 08:42 GMT, Gold (XAU) is trading $2016.30, up $0.32 or +0.02%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $187.55, up $3.58 or +1.95%.

Spot gold is maintaining its position after increasing by over 1% during the previous session. This is due to a decrease in yields, which occurred because there are concerns about the possible spread of problems in the U.S. banking industry.

Fed Rate Decision Will Impact Gold

At 18:00 GMT, the announcement for the Fed’s rate decision will be made. While many investors anticipate the U.S. central bank to increase interest rates by 25 basis points, they are also seeking indications regarding future actions.

If the Fed were to unexpectedly halt the rate hike, it would indicate a worsening banking crisis and potentially lead to a rise in the value of gold. Bullion is recognized as a safeguard against inflation and financial instability, but an increase in interest rates typically diminishes the appeal of zero-yielding assets.

JOLTS Data Weakens Dollar

According to Tuesday’s data, job openings in the United States decreased in March, and layoffs reached their highest point in over two years, indicating a potential weakening in the labor market. If uncertainties regarding the banking crisis and fears of a possible U.S. debt default persist, the value of the dollar is likely to diminish, leading to increased attention on gold.

Senate Leaders Debate Debt Ceiling

On the same day, leading Senate Republicans urged President Joe Biden to either accept their party’s debt-ceiling proposal or present a different option. Simultaneously, a top Democrat hinted at the possibility of attempting to pass a “clean” debt-ceiling increase in the following week.

Technical Analysis

Currently, the price of gold is above its pivot point at $2002.54, which is now new support. This level is influencing the market’s direction in the short term. Traders are waiting for a significant event or news before entering new trades, which is causing a relative stable trade in the market despite yesterday’s attempted upside breakout.

If the price drops below the pivot point and stays there, it indicates that there are more sellers in the market, and this could lead to a further drop in the price of gold, possibly to the first support level (S1)of $1956.30.

On the other hand, if their is a sustained move above the pivot point then this would suggest the buying is getting stronger. This could create the upside momentum needed to challenge the next resistance level (R1) of $2035.78.

For a look at all of today’s economic events, check out our economic calendar.