Gold Price Prediction – Gold Whipsaws and Edges Lower Following Fed Announcement

Gold prices whipsawed but remain little changed following the Fed’s monetary policy decision. The Fed increased interest rates by 25-basis points and removed from the statement the term “accommodative” which described the Fed’s monetary policy. Gold prices rebounded and then dipped, as the dollar gained traction in the wake of the decision. The Fed is expected to raise rates gradually and keep rates elevated until 2021.

Technical Analysis

Gold prices rebounded and dipped in the wake of the Fed’s decision and could support near the September lows at 1,187. Resistance on the yellow metal is seen near the 50-day moving average at 1,204. Momentum is neutral and turning negative. The MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation. The fast stochastic generated a crossover sell signal, which points to accelerating negative momentum. Volatility remains very low with the Bollinger band width printing at its lowest levels since June.

The Fed says that the risks to the economic outlook are balanced. The Fed’s interest rate forecasts showed shows the fed sees rates above the target of 3% for an extended period.  Monetary policy is expected to remain above 3% until 2021. This is the first meeting where the Fed made projections out to 2021. The Fed also sees another rate hike coming in 2018. At this meeting, 75% of the Fed officials see a 4-rate hike in 2018. This will be the first time since forecasts were introduced that the Fed will raise rates at a higher rate than they forecast at the beginning of the year. The Fed believes that household spending is rising and that fiscal stimulus is leveraging spending.  The Fed sees GDP at 3.1% in 2018 and 3.5% in 2019. The Fed sees inflation remaining stable at 2%, while the uptick in oil prices is expected to be transitory.