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Gold Prices Forecast: XAU/USD Spot Wavers, Awaiting Fed Decisions

By:
James Hyerczyk
Published: Sep 19, 2023, 06:39 GMT+00:00

As XAU/USD hovers near two-week highs, all eyes turn to the U.S. Federal Reserve and impending rate decisions.

Gold XAU/USD

In this article:

Highlights

  • Gold (XAU/USD) nears a two-week high as the U.S. dollar falters.
  • Market keenly awaits central bank meetings, starting with the Fed.
  • Softened U.S. dollar boosts gold’s allure to international buyers.
  • Investors’ focus: inflation risks and future rate hike probabilities.

Gold Prices Flutter Ahead of Key Central Bank Decisions

Gold (XAU/USD) is exhibiting a cautious demeanor, hovering near a two-week high as the U.S. dollar wanes from its six-month peak. Traders are positioning themselves ahead of pivotal central bank meetings, beginning with the U.S. Federal Reserve today. The market’s focus is squarely on future rate hikes and inflation outlooks, elements that are vital for the precious metal’s performance.

U.S. Dollar and Overseas Buyers

The softening U.S. dollar has made gold more attractive to international buyers. This comes just ahead of the anticipated policy decisions from the central banks of the United States, Britain, and Japan. The dollar’s 0.3% dip against rival currencies has rekindled interest in gold, as investors are increasingly concerned about inflation and interest rate changes.

What the Fed Might Signal

The U.S. Federal Reserve is unlikely to change its current rates, but all eyes will be on Fed Chair Powell’s insights on inflation risks. While Powell is expected to stress that inflation threats persist, he is likely to express a “wait-and-see” approach. Low global inventories of gasoline and diesel pose short-term risks to inflation targets, a situation that could impact gold’s appeal should the Fed opt to hike rates further to control inflation.

Market Sentiment

With the Bank of England expected to raise rates and the Bank of Japan’s stance still unknown, gold investors are treading cautiously. If inflation remains sticky due to strong consumer spending and a tight labor market, it would force central banks to maintain or even increase elevated rates, hampering gold’s prospects for a strong rally. Therefore, it is increasingly unlikely that the Fed will loosen its grip on financial conditions this year, keeping gold bulls in check.

Short-Term Outlook

In the short term, the outlook for gold remains uncertain, swaying between bullish and bearish sentiments. The market is keenly awaiting cues from central bank policies, specifically the Fed’s decision due on Wednesday. Given the global focus on inflation and interest rates, gold is caught in a limbo, its fate intricately tied to upcoming central bank pronouncements.

The market’s unease manifests as it navigates through a maze of inflation risks and monetary policy adjustments. For now, gold remains a barometer of global economic anxieties, its path ahead clouded by the decisions that will emerge from this week’s central bank meetings.

Technical Analysis

4-Hour Gold (XAU/USD)

The current price of 1930.55 is marginally above both the 200-4H and 50-4H moving averages, indicating a possible positive momentum, albeit slight. The 14-4H RSI of 62.12 suggests that momentum remains on the stronger side, but it hasn’t reached overbought territory.

The current price sits comfortably between the main support area of 1893.07-1885.79 and the main resistance area of 1946.99-1954.88. Although it has decreased slightly from the previous 4-hour price, the commodity remains closer to its resistance level. This, combined with the RSI reading, suggests a mildly bullish market sentiment for Gold in the short term.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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