Gold Prices Forecast: Market Braces for Impact as Fed Rate Projections Loom

Gold Price Movements Ahead of Fed Decision

Gold prices remained relatively static as traders anticipated the upcoming U.S. Federal Reserve policy announcement and comments from Fed Chair Jerome Powell. The market is focused on the Federal Open Market Committee’s statement at 18:00 GMT and Powell’s press conference at 18:30 GMT. With rates likely to stay unchanged, attention is on the Fed’s economic and rate projections for the year.

At 10:09 GMT, XAU/USD is trading $2154.27, down $3.305 or -0.15%.

Factors Influencing Gold Prices

The possibility that the Fed might not indicate as many rate cuts as expected could impact gold prices. If Powell’s remarks are less dovish than hoped, gold could see a decline, falling to a range between $2089.77 and $2064.87. However, gold continues to find support due to a general increase in commodity prices.

Recent U.S. consumer and producer price index reports showed higher-than-anticipated figures, suggesting less aggressive rate cuts. The CPI rose by 0.4% monthly and 3.2% annually, with core CPI also exceeding predictions. Energy and goods prices largely drove these increases, evidenced by a 2.3% rise in energy costs and a 1.2% surge in goods prices in the producer price index.

Economic Indicators and Market Expectations

Retail sales growth and a slight decrease in jobless claims also factor into market predictions. Despite these developments, U.S. Treasury yields dipped as investors awaited the Fed’s interest rate decision and future monetary policy guidance.

The dollar’s strength remained consistent, reaching a two-week high, which affects gold prices negatively as it becomes more expensive for holders of other currencies. The Fed’s stance and Powell’s statements are key focal points, with the market now pricing in a lower likelihood of rate cuts, down to 73 basis points from an earlier expectation of 150.

Market Forecast

Short-term, gold market trends appear cautious. The Fed’s stance on rate cuts, influenced by recent economic data, suggests a bearish outlook for gold. If the Fed indicates fewer rate cuts, we could see a further dip in gold prices. However, the ongoing support from broader commodity trends provides a buffer, suggesting potential for rebound if global economic indicators shift favorably. Traders should watch for the Fed’s comments for cues on gold’s near-term direction.

Technical Analysis

XAU/USD is in a strong uptrend, based on the intermediate trend indicator, the 50-day moving average at $2061.84 and the long-term trend, the 200-day moving average at $1980.845.

However, it remains vulnerable to a near-term retracement of the rally from February 14 to March 8. This makes the retracement zone at $2089.77 to $2064.87 a major downside target. On the upside, a trade through $2195.235 will signal a resumption of the uptrend.