Gold (XAUUSD) Price Forecast: Gold Price Direction Set by 50-Day MA, Powell Remarks

Gold Treads Water Ahead of the Fed

Spot Gold (XAUUSD) is trading steady-to-lower as traders take a breather ahead of today’s Federal Reserve interest rate decision, monetary policy statement and economic projections. Traders are trying to balance two key forces: rising geopolitical risk in the Middle East and uncertainty around the timing of the next Fed interest rate cut. At this time, neither factor is compelling enough to push gold into a clear breakout in either direction, although since the war between the U.S. and Iran began on February 28, there has been a bias to the downside.

Focus will turn to the Fed at 18:00 GMT, where it is widely expected to keep interest rates unchanged in the 3.5%-3.75% range. Policymakers appear cautious given the uncertainty tied to the war and especially since inflation is still above the 2% target and inching higher. Today’s rate decision has been telegraphed for weeks, which means trader focus will be more on what comes next. Some of the best intel from the Fed will come after the initial release of the monetary policy statement. In the post-meeting press conference, the Summary of Economic Projections and Chair Jerome Powell are expected to provide clues about whether rate cuts are still planned for later this year.

Rate Cut Hopes Have Already Taken a Hit

Gold trader expectations for rate cuts have already shifted with the proof being the major top at $5602.23 on January 29, one day after the last Fed meeting. The year started with traders expecting 2 or 3 rate cuts sooner, but traders are now pricing in potential easing closer to October or December. Although we haven’t seen it reflected in the price action yet, there is growing uncertainty about whether policymakers may delay cuts entirely if inflation stays elevated due to rising energy costs. For gold, this matters because higher interest rates tend to cap the upside by making yield-bearing assets more attractive.

War and Oil Are Helping but the Fed Is Pushing Back

For the last three weeks, geopolitical risks have been rising. The war in the Middle East has been escalating and oil prices have moved above $100 per barrel. These events have been driving inflation fears. This type of environment typically supports gold as an inflation hedge. However, the benefit is being offset by the Fed’s restrictive policy stance. Essentially, what this means is gold is getting support from inflation fears, but facing pressure from high interest rates at the same time.

Everything Comes Down to What Powell Says Today

Looking ahead, Spot Gold’s direction will depend heavily on Fed guidance. In my opinion, if policymakers signal fewer or delayed rate cuts, gold could remain capped or drift lower. On the other hand, any hint at easing from Powell later this year, combined with ongoing geopolitical stress, could help gold stabilize and attempt a move higher.

The 50-Day Moving Average Is the Line in the Sand

While the fundamentals seem to be putting all the weight on Powell’s post-meeting comments, technical analysis of the daily chart clearly shows that the next move in the market hinges upon trader reaction to the 50-day moving average at $4976.16.

A hawkish Fed, combined with a sustained break under the 50-day MA could trigger a sharp break into the retracement zone at $4744.34 to $4541.88.

A neutral to dovish Fed and the re-establishment of support at the 50-day MA could fuel the start of a rally back to at least $5143.89.

More Information in our Economic Calendar.