Gold Price Forecast Fed Decision on Trend Guidance Critical Levels

Gold Price Forecast: Fed Decision on Trend Guidance, Critical Levels for XAU/USD – DailyFX

Gold price forecast

  • The price of gold (XAU/USD) has recovered slightly in recent days, but continues to show a consolidation-oriented tendency
  • Volatility could increase next week with the Fed decision on the economic calendar
  • This article focuses on the technical outlook for gold and examines key price thresholds that could be relevant in the coming days

Most Read: USD/JPY in consolidation phase, but Fed decision could trigger big directional move

Gold has shown limited volatility in recent trading sessions and hasn't really changed much over the last two weeks or so, with prices moving up and down with no discernible trend. However, things could change in the coming days thanks to a key event in the US economic calendar: the Federal Reserve's decision on Wednesday.

In terms of expectations, the US Federal Reserve is expected to leave borrowing costs unchanged but could reduce its tightening bias in the policy statement after the meeting.

While strong economic growth, as reflected in the latest GDP report, argues for policymakers to maintain their hawkish stance, progress in combating inflation argues for laying the foundation for a shift towards easing policies. For this reason, a more moderate outcome should not be completely ruled out.

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In the event that Chairman Powell takes a looser stance and signals that discussions on the general parameters for rate cuts are well advanced and have made further progress compared to the previous session, traders should brace for the possibility of a sharp decline in bond yields. This should support the price of gold.

The opposite is also true. If the FOMC chairman decides to push back against market pricing for big rate cuts and the timing of the first cut, yields are likely to rally further, which would boost the US dollar and weigh on precious metals. However, given Powell's reversal last month, this scenario is less likely to occur.

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After falling to multi-week lows last week, gold has recovered slightly but continues to show a consolidation-oriented bias, with prices caught between trendline resistance at $2,030 and horizontal support at $2,005. In order for there to be significant directional movements in the coming days, one of these two thresholds must be exceeded.

Considering possible outcomes, a resistance break could push XAU/USD towards $2,065. If there is further strength, the bulls could launch an attack towards $2,080. Conversely, if support is broken, we could see a pullback towards $1,990 and subsequently $1,975. Continued weakness from this point could bring the 200-day moving average into play.


Gold price chart created with TradingView