Gold Price Prediction for March 22, 2018

Gold prices surged higher, and broke out above trend line resistance,  as the dollar slumped following the Federal Reserves decision to increased interest rates. Prices rebounded back above the 1,333 level, and are poised to test target resistance near the March highs at 1,340.  Support is seen near the former break out level near 1,323. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). This points to higher prices.

The Fed Appears to Be on Course for More Rate Hikes

The Federal Reserve increased the Fed Funds rate on Wednesday by 25-basis points to a range between 1.50% and 1.75%, as widely expected.  The fed increased its growth prospects for the U.S. economy, but railed to increase their forecast for rate hikes during 2018. Currently the average interest rate incorporate 2-more 25-basis point increased during the balance of 2018.  The Fed on average did increase its forecast for 2019 and 2020.  Inflation remains an issue, as the Fed is concerned that inflation remains subdued despite economic and jobs growth.

New Fed Chair Jerome Powell in his first meeting approved the widely expected 25-basis points rate increase that puts the new benchmark funds rate at a target of 1.5 percent to 1.75 percent. It was the sixth rate hike since the policymaking Federal Open Market Committee began raising rates off near-zero in December 2015.

Along with the increase came another upgrade in the Fed’s economic forecast, and a hint that the path of rate hikes could be more aggressive. The market currently expects three hikes for 2018, and that remained the baseline forecast, but at least one more increase was added in the following two years.

Inflation expectations, were changed little. The 2018 forecast remains just 1.9% for both core and headline. For 2019, the forecast for core personal consumption expenditures edged higher to 2.1% from 2%, while headline remained at 2%. The benign inflation expectations are particularly remarkable considering that Fed officials now see unemployment running even lower than before.