Gold Price Prediction – Gold Trades Sideways After Fed Decision

Gold prices moved lower by whipsawed in the wake of the FOMC decision and the stronger than expected US private payroll data. The Fed kept rates unchanged as widely expected. The FOMC acknologed that growth has rebounded since December but inflation has weakened. The fed said that inflation was likely transitory, which means that it should only be a temporary blip in inflation. As of January inflation was close to the Fed’s target. The market is currently pricing in a rate cut by the end of 2019, but the Fed gave no inclination that a cut would be needed.

Technical Analysis

Gold prices whipsawed and generated an outside day with a higher high and a lower low and a lower close. This does not mean that much when a market is consolidating. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. This occurred in the middle of the neutral range which likely means that this is still a consolidation pattern. The current reading on the fast stochastic is 30, which is in the lower portion of the neutral range. The MACD (moving average convergence index) moved sideways and after generating a crossover buy signal it made a crossover sell signal. The MACD histogram generated a crossover buy signal, and is printing just above the zero index level.

The Fed Keeps Rates Unchanged

Federal Reserve officials voted to hold interest rates unchanged, as a lack of inflation pressure outweighed an economy. The central bank held its benchmark rate in a target between 2.25% and 2.5%, meeting market expectations. The central bank announced that Interest paid on excess reserves that banks keep at the Fed will now be set at 2.35%, or 0.05% lower than before. This is just a technical issue and does not reflect a monetary policy change.